“Philanthropy needs to shake off the scarcity mindset”

In Delusional Altruism, author and corporate consultant Kris Putnam-Walkerly discusses the myths and fears that stunt philanthropic activity. In an Outlook Business interview, Putnam says that non-profit organisations and their funders need to set goals, strategize and allocate resources to the cause as if they were running a corporate for-profit organization. Hobbling along on scarce funds and talent will sabotage the entire mission. It is not enough to be good-hearted; a philanthropic organization needs to be effective.

Tell us more about the idea of Delusional Altruism. What’s the most important aspect of this phenomenon?

The first and the most pervasive aspect is the scarcity mindset. This is really a belief, a misguided belief, that maintaining a spartan operation as a non-profit delivers more value to the community or the organizations you are supporting. The less you invest in yourself as a funder and on building the organizations you support, the more money you have left to give away, and therefore, you can make a bigger impact. That kind of thinking is just wrong.

In for-profit business, there is a belief that investment in the organization is important, so investments in research and development, talent retention and recruitment, governance board and technology are taken seriously. When it comes to the non-profit sector, it’s as if none of this even exists. People feel non-profits should hobble along, those working for them should do it for the cause and that they don’t really deserve to be paid well. Even the smartest and savviest business leaders who do all the right things to grow and scale, and sell their business, when they turn their attention to philanthropy, let all those smarts go out of the window. Often, donors will expect to see results from a non-profit to know the impact, but they won’t even fund an evaluation.

To have the greatest impact as a funder, you really need to be the strongest and best philanthropist you can be. To do that, you need to equip yourselves with the knowledge of the community and its issues. You have to invest in research, infrastructure, technology, strategy and whatever it takes to make your foundation have a strong impact. Too often funders fear spending money on “overhead” for non-profits. But, funders need to recognize the full cost and also offer funding for longer periods. The problems (social) we are talking about took a long time to be created, so it is going to take a while to fix them.

Another way in which the scarcity mindset affects funders is that they think they don’t have enough money to make a difference, that maybe they are wealthy but they are not billionaires. But, you have to recognize, as a philanthropist, that you have a lot more to give than just money — your own intellect, knowledge, relationships and experience. You can also leverage your funding and reputation to convince others to fund the cause as well.

What are the other factors that cause donors to hold back?

Apart from scarcity mindset, the most common factor in Delusional Altruism is the fear of losing control. Donors fear the money they give away will not be properly utilized. Therefore, they want to dictate exactly how it’s going to be spent and the whole process. They like to determine what the need is, the best solution for it, and benchmarks in terms of when and what they will allocate, rather than entrust the people who are really working on it.

The second fear is the fear of exposure. High net-worth individuals often fear people knowing about their wealth for a lot of reasons, one of them is the fear that every time you are out, you might get asked for money, and you often find yourself in a difficult situation. Plus, a lot of donors feel guilty about their wealth. Often, they give anonymously.

The third is the fear of learning and discovering that you may not be as good in finding solutions to the causes you choose to support. People equate wealth with intellect. You kind of assume if somebody is successful in business, they must know how to solve homelessness or whatever the issue might be. That may not be true and it rattles a few donors. With all of this fear, you cannot be successful because fear prevents us from unleashing our potential.

Fear also slows down the speed of decision-making by funders and non-profits, you mention in the book. What else contributes to slow execution?
Yes, the slowness problem is a result of fear experienced by donors — they like to wrap themselves up in data because they are afraid of making a decision. It’s very common in philanthropy foundations to spend up to 18 months to develop a strategic plan, after that spend three months graphically designing and writing it up, and then wait for another two months till the next board meeting to get a nod. So, you have already spent two years towards putting out a plan. Well, the problem is, two years later, the world has changed.

Also, the slowness comes from the minimal accountability there is in philanthropy, unlike in for-profit companies. Both donors and non-profits need to be quicker in decision making. They need to be agile and adaptive. When it comes to strategy, they have to think about the next twelve months, not the next five years because we can’t predict that much. It should be basic things like, where are we today, where do we want to be a year down the line, and what are the three things we need to do to get there. It is as simple as that.

But then, foundations suffer from one other thing I call ‘bureaucratic bloats’. This happens even in the smallest of them. It’s a belief that we need a complex application process, or that you make decisions only twice a year or only when the family meets in person which can’t happen now, or that we require all these reports that are actually never read but you need them anyway.

Let me give you an example. One of my clients was the second-in-command of a foundation in Cleveland. That foundation made site visits with all of their grantees. They received proposals three times a year and made site visits with all of them if they met certain criteria. It was part of their culture. They involved the board, all their staff, it was a big deal. All fine. And then, this same woman went as CEO to a different foundation. It was a brand new foundation, and it was herself, her two part-time employees, and a brand new board, which didn’t know anything about philanthropy. She was overwhelmed and wondered how on earth she would do all of those site visits. Well, you can’t and you don’t even have to.

That’s the point about bureaucracy — many of the practices don’t happen out of bad intent, but it’s delusional altruism because you are not thinking about the fastest way or the most effective use of resources. 

You have spoken about effectiveness in decision making, tighter execution and accountability, all of which are really corporate practices. But, what is it that fundamentally differentiates a corporate for-profit versus a non-profit, apart from the fact that the latter does not aim to maximize monetary value for shareholders?

The fundamental differentiator is that you have a different bottom-line with a non-profit organization. Your bottom-line is really going to impact whatever issue you are working on. That bottom-line is a lot more challenging to assess, and success isn’t quite as clear cut as it might be, if you are looking at revenue or growth or stock value. Take for example, substance abuse: it is very common for people to become clean and sober, but they might lose their sobriety anytime. There is a lot of recidivism. Now, in such a situation, what would you count as success and failure? It depends on what your expectation is and what your knowledge and reality of the field is. So, if you are expecting to change human behaviour and continuously trying to improve along a straight trajectory into the end of time, you are setting yourself up for failure. Every social problem is different in what is needed and what will be successful. So, barometers of success also have to be different.

What do you think needs to change for philanthropies to make the best impact?

Funders need to think about what is the true cost of running a non-profit organization and invest accordingly. You need to take into account the context and the ecosystem in which the non-profit is operating. The role of non-profits or non-governmental organizations is critical for a society, in terms of service delivery, advocacy, policy change, and in building and strengthening economies. Therefore, funders need to constantly think about how they can provide enough support to NGOs to help them successfully attract and keep talent, and have a pipeline for talent development within organizations. The funders should also ensure that the organizations have enough resources, the strategy, right data evaluation and connections to be successful. So, to me, it is really about lifting funders’ awareness and willingness to support what I call the full cost of non-profit organizations.

There are examples of funders in the US that are doing this — Ford Foundation, The David and Lucile Packard Foundation and Hewlett Foundation. This should percolate to the entire sector.

What do you think holds most people back from philanthropy?
I think what holds them back in many ways is lack of a strategy. There is research from US Trust, which shows that, for wealthy donors, the biggest hurdle lies in picking the right cause. They do not know what issues they care about the most and feel overwhelmed by the world’s problems. Besides this lack of clarity, there is also a lack of strategy in terms of what they want to accomplish. For some people, what drives them is something they relate to personally. For example, because your child had brain cancer, you want to help other families and support brain cancer research. In corporates, a big part of decision-making is to know what the corporate purpose is. Once anyone decides what they want to support, they have to figure out who they can trust with their money. Often, donors can really benefit from having a trusted advisor.

Is size an advantage when it comes to non-profits?

I think there is a kind of a fear among funders of smaller non-profits — the grass root community-based organization. They fear these non-profits have less capacity, use more volunteers, are less savvy or whatever. But, these non-profits could be doing amazing work. A lot of Fortune 500 companies still choose large national or international organizations. It’s really important for funders to not just stick with the big national or international organizations, but also to look at smaller grass-root organizations, especially those led by the people who are deeply entrenched with the cause. For instance, people who have disabilities serving the needs of people in disabilities. When you see a great leader, you have to muster the confidence to support by way of capacity building.

Is there a checklist that donors should follow?

I don’t think of it as a checklist, but as questions to ask yourself, whether you are an individual donor or a corporate donor. The first is why do we exist, what’s our purpose. The next question is what do we want to accomplish, what kind of impact do we want to make, say a year from now and over the long term. Then, how are we going to engage with others in accomplishing the targeted goal. For a company, it could be their employee engagement strategy such as corporate volunteering programmes or getting leaders to serve on the boards of non-profits or opening new doors for them. Like I said earlier, donors have to think of themselves as someone who can give more than money.