|
|
 |
|
| Visions & Revisions |
The Business of Philanthropy
Douglas McWhirter
09/01/2004
|
Eli Broad approaches philanthropy with the same capitalistic zeal that enabled
this son of Lithuanian immigrants and graduate of Detroit’s public school system
to build two Fortune 500 companies and “retire” a multibillionaire. With his
foundation’s $1.2 billion in total unrestricted assets, Broad and a full-time
staff of 45 philanthropic professionals do not simply make grants—they “invest”
in such areas as public education, science and civic initiatives, much the same
way that a venture capitalist would invest in promising business start-ups. Not
content with traditional no-strings giving, Broad wants a measurable return on
his philanthropic investment, and places as much importance on the strength of a
potential grantee’s management team and business plan as he does on the
worthiness of its cause. This no-nonsense approach to giving has enabled The
Broad Foundations to work successfully with the nonprofit sector—even with
government agencies. Broad offers a leading example of “venture philanthropy”
for those of us who want our charitable dollars to make a difference.
 Philanthropies and foundations can benefit by adopting certain business
principles adhered to by venture capitalists, such as risk management, fiduciary
accountability and decision-making based on a project’s potential return on
investment.
I believe that foundations and philanthropies in general should not think
they are just giving away money: They are investing money for the public
good. They are not simply writing a check and forgetting about it. It involves
getting a proposal and a business plan, believing in the people you are
investing in—that they are truly going to make a difference, that they are truly
change agents—and looking for a return.
Philanthropic success can be measured in dollars and cents.
It is not like a business where you are going to have a financial P&L,
but you can measure it. For example, with the Broad Center for School System
Management, we measure success by counting the number of program graduates who
now have jobs in urban school districts and determining if those school
districts improved. We ask ourselves: Are we improving student achievement? Are
we closing the gap between income and ethnic groups? In other areas we give
scholarships, and we track how those students who received them have done. We
review and measure, and if we invest money in a program and we do not see a
return, that is the end of our investment in that program.
Noble goals are not enough. To succeed, charities and nonprofits need
strong business plans.
You could fill a building with conference reports and studies, but what you
really need are business plans and leadership that is tough and determined to
get the job done. Just like in business, you have to find leaders you believe
in, who are change agents. You work with them to create a plan, you measure
results, and then hold them accountable by pouring financial and human resources
where you are getting results and withdrawing them where you are not.
In the absence of competition and market pressures, nonprofits, governmental
social services agencies and philanthropies will never operate as efficiently as
the for-profit sector.
That may be so, but if you have a foundation like ours or like the Gates
Foundation, we have good trustees who hold management accountable. They want to
see results for their money rather than just listing that they give so much here
and so much there. So, you do not have an income statement every year, you do
not have graphs to show sales, profitability and margins, but there are other measurements.
Business principles are not consistent with the philanthropic
sector’s core values.
In both business and philanthropy, we do not do things to maintain the status
quo—we do them to make a difference. We invest in things that need improvement,
or that do not exist before we invest in them. This is like creating needed
products that no one has imagined before.
The ultimate objective of philanthropy is to enable grantees to sustain
themselves as they work to achieve their goals.
There are all sorts of grantees out there. Certainly in education, we want
grantees to be able to use the funds they have—public or otherwise—more
efficiently. They have to sustain themselves and become more efficient because
there is no way that philanthropists are just going to throw money at public
organizations. Some grantees just need help getting started. We have invested
money in young scientists around the world who are decoding the human genome,
but who are not ready for grants from the National Institutes of Health (NIH).
When they make progress, they will get grants, and we have done our job by
getting them the seed capital they needed to start their work. They are the farm
team, and we want them to get to the big leagues, which is NIH money and other
federal money. We provide the venture capital to start.
|
|
|
|
|
|
|
