Login with FacebookInequality in Giving- Interview with Rob Reich, Author of “A Failure of Philanthropy”
Perla: Rob, you've done a lot of research on how very little individual donations here in the U.S. actually go towards causes that serve the needs of the poor. Can you update us on your research on this inequality of giving?
Rob: It's proceeding on two fronts. First, I’m following up on the example I gave in the SSIR article about private giving to public schools in California. I have ten year database about every nonprofit in California that raises money for public schools. I'll be looking at the distribution of private dollars and their consequences.
Perla: I just recently realized that you used to be a teacher. Now it makes sense your interest in public schools.
Rob: Yes. I used to be a sixth grade teacher in Houston. And the second thing - I'm in the midst of writing a book looking at the simple and fundamental question about the role of the state in providing incentives to give money away. Why should the state provide any incentive for donations? I think the answer is not well developed or understood.
Perla: What's the response you get from donors when you present your research?
Rob: I often get a little bit of a surprise. In particular, people don't realize - even though it's quite consistent in the findings - that over half of all charitable dollars from individual donors to religion and faith-based charities that serve the poor, have already been carved out. The media has not done a good job of reporting this. And then with respect to the inequalities in giving, in the audiences that I talk to, there's often some thought that charity does have a role in serving the needs of the poor and disadvantaged. And they are surprised overall how little goes to the needy. My anecdotal experience matches up with the findings that the Google study presented - the intention that people have to give to the poor is widespread but not actualized in practice.
Perla: Why do you think that is?
Rob: The simple answer is that the most important reason people give money away is that they know already to give. Poor people are not asking rich people to give money away.
Perla: What can small and medium sized nonprofits who provide basic services for the poor do?
Rob: They should try to develop a development office. But that's a catch twenty-two- you need donation and overhead to get it off the ground. You can try to appeal to people's best intentions. Show statistics. But it shouldn't be the responsibility of people working in these nonprofits. This is a public policy problem. One of the public policy solutions is to provide a differentiated incentive structure. It makes sense to me to provide additional incentives, or diminish existing incentives for things that don't give to the poor. How to operationalize what that would look like is still unclear. I don't accept that this will politicize the deduction structure. There's already politics involved in defining what is 501C3 and 501C4 so we're not crossing a new threshold. The system makes distinctions between what organizations get tax benefits and which don’t
Perla: What are some things that can be done to raise awareness about this?
Rob: The media could do a better job reporting about it. The kind of high profile, glamour with which the media portray big ticket donations such as refurbishing cultural, medical institutions - I'd like to see similar attention paid to, say, the Robin Hood foundation or other organizations where the intention is to serve needs of the poor. But I don't want to make this a media problem or a nonprofit problem - this is a public policy issue. There are things that nonprofits and media should do, but this is mostly public policy problem.
Perla: Do donors also have some responsibility to be more aware of what they are giving to? I sometimes wonder if donors, because they tend to come from a different socio-economic background than the poor, whether they feel less comfortable being involved or giving to the poor?
Rob: I don't think it's a matter of donor psychology or stereotypes about the poor because there's been vast amounts of civil society efforts around the poor- some of which are paternalistic -but lots of activity and interest.
Perla: Do tax incentives matter?
Rob: Tax incentives do matter, especially for high income givers. But the majority of Americans - 70% don't even itemize - they don't take advantage of the deductions. The impact is less strong than initially thought.
Perla: Is there any other research you are working on that would be of interest to nonprofits?
Rob: Yes, I'm also working on whether the domestic poor or international poor are needier and whether the American poor have claim before the global poor? Does the tax deduction play a role in steering donations one way or another? The Gates foundation has a massive program for global giving. Lots of people criticize the U.S. government for the small percentage of money spent on global aid, but if you add all the U.S. philanthropy, it's a lot of money. However, the foreign aid budget is publically decided and private philanthropy isn't. The comparable lack of benefit from someone from Hurricane Katrina receives from US aid - does that person have something to say about big foundations and how they spend their money?
Use your heart and head when giving
Published in the Financial Times Copyright 2008
There’s a trend in philanthropy to treat the act of giving as an “investment decision”. This is partly because non-profit management is taught increasingly in business schools, and partly because more wealthy donors with a business background are are becoming involved.
Donors are younger, more active and may have made their money in finance. They believe, as I did until a couple of years ago, that there is a holy grail of metrics, and if we just worked harder to find it, we could measure all non-profits, lay them side by side and figure out which ones were more effective in doing good in the world.
What gets lost in all of this focus on evaluation and numbers is the grace and joy of philanthropy. Philanthropy inspires. It tells stories. It reconnects us with others and reminds us of our shared humanity.
Two years ago, I visited a local homeless shelter located between the train tracks and the bus depot. It provided homeless people with free breakfast, a place to hang out and referrals.
I asked the director, a Unitarian minister, how he measured effectiveness. I had expected him to say something about the number of people he had helped find jobs, or the number of breakfast sandwiches it handed out, etc. Instead, he replied simply: “Last year one of our [homeless] regulars died. We paid for his coffin and his burial. And 10 people, who he’d gotten to know here, showed up for his funeral.” He paused. “Does that answer your question?”
That sobering encounter made me think hard. The fact that the non-profit provided a place where a homeless person made friends who cared enough to go to his funeral – something that would not fit into anyone’s investment metrics – speaks volumes about how this non-profit made an impact on this person’s quality of life. The organisation did something incredibly decent for this homeless person at his death. It pulled at my conscience and my heart.
I shouldn’t be so surprised by this story’s effect on me. After all, recent research on philanthropy points to the fact that it is a highly emotional and social behaviour. The work of Deborah Small, a professor of marketing at Wharton business school, shows that presenting potential donors with metrics suppresses donations because it lowers empathy. It is empathy, her research says, that triggers giving.
This rings true intuitively – we’ve all pulled out our cheque books at some point at the sight of the picture of the child in India with a cleft palate.
That’s not to say that effectiveness does not matter and we should look only to our hearts. It matters a great deal, but the human dimension is just as important. Many non-profits are trying to make a difference in people’s lives. And that’s hard to do. People are not products. We are complicated – changing our attitudes, ideas and behaviours can take years and it’s difficult to isolate which single factor contributed to any specific result.
And so, when people ask, “how do I know whether this is a good non-profit?”, I respond as follows: “Go and visit. See for yourself. Volunteer for a soup kitchen and sit down next to an ex-felon. Ask them about their lives. What got them into trouble? How are they coping out of jail? How is this soup kitchen helping?” You will be amazed by the stories. It’s eye-opening, vivid and inspirational.
The other advantage of this first-hand approach is that you’ll see that the work of the non-profits extends beyond tangible, immediate or predictable results. Many such organisations – even those that provide direct services – also work to educate, change attitudes and affect policy. These efforts towards systemic change – think about the various efforts by environmental non-profits in the past 30 years – have a long pay-off timeline and only years later do we see the results of their efforts.
Philanthropy is all the more powerful because of these poignant stories. Let’s not rob such giving of its human pulse by regarding it only as an investment decision.
Bono, of the rock group U2, was inspired to become a philanthropist after travelling to Africa. “I saw it. I heard it. I felt it,” he said.
This is the gift of philanthropy. It will awaken you to the joys, sorrows and above all, the hopes of life and our world.
Fierce Debate on Merits of Strategic Philanthropy
A fiery debate took place at the recent Grantmakers For Effective Organizations conference in San Francisco between Bill Schambra, director of the Hudson Institute’s Bradley Center for Philanthropy and Civic Renewal, and Paul Brest, president of the William and Flora Hewlett Foundation. Ed Skloot, former president of the Surdna Foundation, was the moderator, but as Schambra and Brest volleyed responses back and forth, Skloot joked that he was really just “roadkill.”
Bill Schambra dismissed the notion that foundations should be driven by strategic philanthropy and its central premise of having a theory of change, upon which results are measured.
“It is wildly unrealistic to postulate a theory of change and expect anything like its typically complex, fragile chains of cause and effect to play out in real life,” he said.
Schambra noted that conservative foundations – Bradley, Olin, Scaife, and several others – are often held up as examples of strategic philanthropy. “That’s absurd,” he remarked. “These foundations merely capitalized on the political turmoil of the 1960s and 1970s. To be sure, here and there and at particularly critical moments, the conservative intellectual apparatus contributed a key study or funded an important legal case or held a useful conference. But the foundations mostly stood back and watched for opportunities presented by events driven by others, rather than trying to force circumstances by detailed strategic planning.”
“What foundations can do, I would suggest, is be serious, quiet, attentive students of their surroundings, watching carefully for opportunities to enhance slightly the trends that they applaud, and diminish slightly the trends that they deplore.”
On the other hand, Paul Brest argued that foundations can no longer navigate by sheer “intuition.” As in the fields of medicine and business, they need to become data driven. “It’s not rocket science, but foundations need a clear view of what they want to accomplish and measure if they are getting there,” he said.
Schambra responded, “What’s the point of everyone measuring if there’s no accepted measurement? Then we’d have hundreds of different ways of measuring, and it would be chaos and an insupportable burden to grantees.”
One of the attendees, Gregg Behr, president of the Grable Foundation, noted that most foundations probably walk a balance between the two opposites presented by Brest and Schambra. Foundations could be strategic on one hand with some types of grantmaking, and then when opportunities arise, be nimble enough to take advantage of opportunities. He gave the example of the decision of the Grable Foundation to pull funding from the public school system in Pittsburgh, PA. Grable Foundation had a strategy for improving public education and yet was flexible enough that when they saw the opportunity to team up with other foundations and take a dramatic step to call attention to the issue, they did.
This conference marked the 10th anniversary of Grantmakers for Effective Organizations. The conference was attended by a sell-out crowd of over 600 grantmakers, nonprofits, and consultants.
