Pros and Cons to Supporting Broad-Impact Organizations, Part Two

By Peter Brach, Ed.M.

My Funding Principles and Practices

As you can surmise from my other materials, I am far from being a traditional philanthropist. My take on best principles and practices is that the most successful for-profit businesses got it right: They take a much more holistic approach. The most striking difference is that they invest heavily in the growth and wellbeing of the entire organization. For-profits invest in creating robust operational departments to improve communication and coordination across all parts of their organizations. They recognize the importance of investing in long-term sustainability.

You don’t find office managers of law firms asking for extensive paperwork to prove that their high-powered lawyers should be provided with an assistant. You don’t see large corporations without budgets for R&D. Conversely, those funding nonprofits are often siloed and only interested in how they can advance their area(s) of concern. Only a small percentage of funders put their specific interests aside to help nonprofits grow stronger, smarter, sustainable, and more efficient.

Put simply: I am impressed with Warren Buffet’s and other value investors’ focus on identifying businesses with solid fundamentals. Once identified, they set their sights on long-term progress rather than spending large amounts of time watching the ups and downs of the stock market.

My primary interest in supporting BIOs involves identifying catalytic opportunities to achieve extraordinary impact. When supporting those working with HNWIs, I am excited by the possibility of helping to free up the time of those most capable of attracting additional wealthy members, while also helping all members give away money as efficiently, effectively, equitably, and ethically as possible. With Confluence Philanthropy, I am eager to see their social media efforts reach many more people in order to grow their capacities and unlock significant amounts of social-impact capital. As mentioned in a previous article, TechSoup has the reach to improve the capacity of hundreds of thousands (and in time, more than a million) nonprofits globally. I am keenly interested in seeing WINGs influence multi-laterals to engage in more equitable growth-funding practices; this is a very high macro-level objective considering that governmental intermediaries contribute much more to charities than philanthropy.

Like Hits-based Giving, I place my bets that some efforts will fail, but the impact from macro-level endeavors, such as those just mentioned, will far outweigh them. So far, my results have been sizable. As mentioned previously, two relatively small grants given to TechSoup enabled it to raise $3.5 million by a hard deadline. Although this is difficult to prove, the Executive Director from WINGS wrote that without my support, it would not have had the bandwidth to raise 1 million Euros from the European Union. Once again, this involved a relatively small grant that I maintain led to a movement whereby over 500 foundations pledged to act on climate change. I hope that stories such as these will inspire you to look for similar opportunities.

I am far less concerned about whether each bet works as planned than on engaging in tried-and-true practices and principles. I’ve never asked a grantee to fill out an extensive application. I try to be a respectful thought partner. With some filters in place, my primary objective is to identify the most promising opportunities to achieve the impact multiplier effect, placing less focus on the specific interventions. My simple approach opened many more options to consider and freed up a considerable amount of time.

Mitigating Risks

As mentioned, Warren Buffet mitigates risks by choosing organizations with solid fundamentals and staying the course to enable them to grow. (Clearly, even he has course-corrected at times.) The obvious downside of this model is that it does little to help countless nonprofits, some run by minorities, often overlooked, and too frequently struggling just to survive. When seeking to provide support in these situations, it is even more critical that you believe the underlying abilities and talents of the staff exist, although perhaps somewhat latent. And, unless you are prepared to provide sufficient multi-year funding, you need to be willing to cut your losses. And even with multi-year support, there may be times when you will need to cut them as well.

Let’s assume you wish to focus on BIOs with solid fundamentals. In that case, my advice is to do your homework, stay alert, prioritize available opportunities for achieving catalytic impact, and be okay with some circumstances underperforming and even failing. You may be able to mitigate risk by presenting or responding to a challenge grant. (Doing so has worked out very well for me.) Also, consider creating a pooled fund. I am a fan of various forms of collaborative funding because the resources available are often greater while the output of all parties involved are usually less.

One challenge with all kinds of investing — including achieving impact with BIOs — is not knowing what happens internally. Moving forward, I plan to put more time into interviewing those who have worked for the organization in question. Volunteering your time and talents can be an incredibly valuable form of capital, while helping you gain a better sense of the strengths and weaknesses of the BIO you hope to put yourself behind.

Conclusion

There are no right or wrong answers that will work for everyone. Hopefully, my three subsequent articles have better equipped you to weigh your options. If supporting BIOs is not a good match, there is much to be said about providing growth funding to direct-service nonprofits, other social-impact organizations, coalitions, networks, platforms, community foundations, affinity groups, and system orchestrators. The reason I have moved up the broadness continuum to supporting BIOs is because of the degree of impact I have been able to achieve.

Trying to neatly wrap up what constitutes the right circumstances for funding any organization is not much different than trying to pick the best financial investment. There are no silver bullets, and no one has all the answers. However, we can continue asking meaningful questions. We can convene funders to explore approaches for mitigating risks while enabling BIOs to leverage their extensive reach. I strongly suspect that part of the answer lies in a collective commitment to collaborate — to stretch beyond what is familiar and safe — and to assess options based on what we believe are our best opportunities to venture farther and wider than has been previously possible.