The power imbalance between NFPs and philanthropists

There has long been a power imbalance between NFPs and philanthropists, but how do we respond to this and put NFPs back into control?

We put this question to Caitriona Fay, national manager for philanthropy and non-profit services at investment and trustee group Perpetual. In her response, she details the challenges facing NFPs and philanthropy…

Third Sector: What advice do you have on bridging the gap between the needs of NFPs and the wishes of philanthropists?

When philanthropists and NFPs sit down together there is ultimately an inherent power imbalance. NFPs need to recognise this and avoid the temptation of tailoring decisions to suit the philanthropist if there is not going to be benefits for the communities the organisation is supporting.

For example, an organisation may know exactly what it needs funding for, but the philanthropist wants to give money to what they think is important. At such times, the organisation may try push a peg through a round hole in order to secure those funds. That could prove detrimental for the community and may lead to a really poor outcome for the organisation as well as the philanthropist.

NFPs need to be able to tell a story about how funding toward what it needs, be it salaries, infrastructure or programmatic costs. This links back to impact. It is not enough just to talk about needs – it is vital to have clarity about what can be achieved if those needs are addressed.

On the philanthropy side, there needs to be a commitment to listening to the genuine needs of NFPs and an open mind to funding those needs if the organisation can demonstrate the benefit. Good philanthropists have an appetite for learning, and there are few people in a better position to help funders understand where dollars are going to have the most impact than the individuals and organisations at the coalface.  

Some people are critical of the philanthropic sector. What can be done to remedy this?

Philanthropists are rarely criticised publicly as much as other sectors, but if you quietly ask an NFP worker what they find most frustrating about trusted foundations, they would probably say philanthropists need to be more open to funding things that may be a bit different or even innovative.

NFPs are desperate for funds that will keep their organisations moving forward, and they need extra support to help them generate revenue. It is really just a mindset from donors to ensure they really listen when they sit down with organisations they are passionate about.

Australia has a long way to go yet in the NFP sector. Ultimately, the sector needs to be open to hearing criticism so it can improve going forward. As it emerges and becomes more sophisticated, we will see more support from philanthropists.

The glorious thing about this criticism of philanthropy is that it is so easily fixed.

What is trending in the philanthropy sector?

One of the really interesting things to emerge in the past few years is philanthropic giving circles. Philanthropy has traditionally been the domain of the ultra-wealthy or people with ultra-high net worth. Communities are now responding by creating giving circles that encourage large groups of individuals to get together with smaller amounts of money.

 Giving circles have created a vehicle for individuals to pull 100 people together and make decisions on $100,000 grants. In many ways it is significant because it is empowering individuals to make a meaningful philanthropic distribution. Traditional philanthropy can learn from this: there is a real hunger in the community to be involved in deciding where the dollars go.

Something that takes place abroad but is not so common yet in Australia is greater engagement with consumer advisory boards. There is a lot to learn about that democratised process.

Communities have a real desire to be engaged in strategic giving. We are at the beginning of what amounts to a mass generational wealth transfer. There are individuals who may not have been active in giving through their lifetime who give in their estate.

Where do you hope to see philanthropy in the next year in Australia?

I hope that philanthropy continues to develop an appetite for criticism of how it works and becomes more self-reflective of how it should and could be working to improve outcomes to its present approach to funding.

While philanthropy in Australia is a growing space, it is still agile enough and small enough that we can have those kind of conversations and influence cultural change that may lead to incredibly positive community outcomes.

How can society help the next generation of philanthropists? What can we do as a community?

Inspiring the next generation of philanthropists is largely down to ensuring they are engaged in giving. We need to make sure we have our volunteering systems correct, have spaces for young people and provide catalysts for inspiring philanthropy as well. One of the really interesting ways we can inspire a young generation to be philanthropists is to think beyond dollar and cents. Every day we are all creating enormous amounts of data through phones, through all the apps we use, and there are opportunities to donate digital data to organisations that may find it really useful. This is a new form of institutional philanthropy that will be readily available.

This article first appeared in the Digital Version of Third Sector Magazine.