Money Well Spent: A Strategic Plan for Smart Philanthropy, Second Edition

By Paul Brest and Hal Harvey

Philanthropy is a booming business, with hundreds of billions of dollars committed to the social sector each year. Money Well Spent, an award-winning guide on how to structure philanthropy so that it really makes a difference, offers a comprehensive and crucial resource for individual donors, foundations, non-profits, and scholars who focus on and teach others about this realm.

Behind every successful grant is a smart strategy. Paul Brest and Hal Harvey draw on the experiences of hundreds of foundations and non-profits to explain how to deliver on every dollar. They present the essential tools to help readers create and test effective plans for achieving demonstrable results. Brest and Harvey tackle thorny issues, such as how to choose among different forms of funding, how to measure progress, and when to abandon a project that isn't working.

The second edition accounts for a decade of progress: a rise in impact investing, the advent of pay-for-success programs, the maturation of impact evaluation, and the emergence of a new generation of mega-donors. Today, the notion of results-driven philanthropy is more important than ever. With this book, the social sector has the techniques it needs to deliver on that idea with impact.

• Language: English
• Publisher: Stanford Business Books
• Release date: Jul 31, 2018
• ISBN: 9781503606036

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© 2018 by Paul Brest and Hal Harvey. All rights reserved.

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Library of Congress Cataloging-in-Publication Data

Names: Brest, Paul, author. | Harvey, Hal, author.

Title: Money well spent : a strategic plan for smart philanthropy / Paul Brest and Hal Harvey.

Description: Second edition. | Stanford, California : Stanford Business Books, an imprint of Stanford University Press, 2018. | Includes bibliographical references and index.

Identifiers: LCCN 2017057764 (print) | LCCN 2017058935 (ebook) | ISBN 9781503606036 (electronic) | ISBN 9781503602618 (cloth : alk. paper)

Subjects: LCSH: Nonprofit organizations—United States. | Philanthropists—Charitable contributions—United States. | Charities—United States.

Classification: LCC HD2769.2.U6 (ebook) | LCC HD2769.2.U6 B74 2018 (print) | DDC 658.4/012—dc23

LC record available at https://lccn.loc.gov/2017057764

Cover design: Michel Vrana

Typeset by Motto Publishing Services in 11/15 ITC New Baskerville

MONEY WELL SPENT

A Strategic Plan for Smart Philanthropy, Second Edition

Paul Brest and Hal Harvey

STANFORD BUSINESS BOOKS

An Imprint of Stanford University Press

Stanford, California

Advance Praise for the Second Edition

Philanthropy is a complicated trade, and anyone who wants to understand how to be truly effective must read Brest and Harvey’s indispensable book. It offers a comprehensive and comprehensible overview of the process, supplemented by a rich trove of examples and insights from two masters of the craft.

—LARRY KRAMER, President, Hewlett Foundation

The extraordinary freedom enjoyed by philanthropy brings responsibilities. Brest and Harvey offer new and experienced philanthropists alike an invaluable guide to consider those responsibilities and to learn about the exciting innovations and growth in philanthropy over the last decade.

—CAROL LARSON, President and CEO, David and Lucile Packard Foundation

The most important book for how to translate large-scale financial resources into large-scale social change. Brest and Harvey provide an essential resource for how foundations can successfully navigate the vast complexities of evidence-based philanthropy, impact investing, and policy change, while creating measurable value.

—LAURA ARRILLAGA-ANDREESSEN, Founder of SV2, Stanford PACS, LAAF.org, and author of New York Times Bestseller, Giving 2.0

Paul Brest and Hal Harvey offer a lucid, reader-friendly, and persuasive case for why rigorous strategy is indispensable for anyone using philanthropy to make the world a better place. It is the best guide available today, bar none.

—JOEL L. FLEISHMAN, Duke University, author of Putting Wealth to Work

"Money Well Spent is the most thorough, comprehensive, and authoritative guide to effective philanthropy published to date. It weaves together compelling examples of philanthropic successes and failures with practical, step-by-step guidance. Every major donor, foundation staff and board member, and philanthropic advisor needs to read this book."

—PHIL BUCHANAN, President, The Center for Effective Philanthropy

Praise for the First Edition

An invaluable resource that distills the essence of strategic philanthropy for those seeking to achieve a greater social impact.

—BILL GATES, Co-chair, Bill & Melinda Gates Foundation

This is an ever-so-practical and yet ever-so-thoughtful contribution to our understanding of how philanthropy should work.

—WILLIAM G. BOWEN, Late President, The Andrew W. Mellon Foundation and Princeton University

"In philanthropy, as in investing, you need a solid strategy to understand what works, what fails, and why. Money Well Spent provides the tools philanthropists need to create an effective strategy and achieve success."

—GEORGE SOROS

For Iris, my life partner and uncompromising editor, with love and gratitude.

PAUL

To Heather, for her tolerance and love, and to Jeremy, Thea, and Mariah, for making this old man proud (most) every day.

HAL

CONTENTS

Preface to the Second Edition

Introduction

PART 1: INTRODUCTION TO STRATEGIC PHILANTHROPY

1. The Promise of Strategic Philanthropy

PART 2: PHILANTHROPIC STRATEGY FROM SOUP TO NUTS

2. Problem Analysis

3. Developing Solutions

4. From Theory to Action

5. Evaluating the Impact of Your Philanthropy

6. Using Outcome Data to Increase Your Impact

PART 3: GRANTMAKING

7. Preparing to Open for Business

8. Inviting Proposals and Conducting Due Diligence

9. Forms of Philanthropic Engagement and Funding

10. Impact Investing and Mission Investments

11. Working with Others in the Field

12. Principles and Practices of Effective Philanthropy

PART 4: TOOLS OF THE TRADE

13. Promoting Knowledge

14. Improving Individual Lives

15. Influencing Policy Makers and Businesses

PART 5: ORGANIZING YOUR RESOURCES FOR STRATEGIC PHILANTHROPY

16. Structures for Philanthropy

17. Principal and Principle

Afterword

Acknowledgments

Notes

Index

PREFACE TO THE SECOND EDITION

Even before Warren Buffett’s $31 billion gift to the Bill & Melinda Gates Foundation garnered huge media attention, the twenty-first century was on its way to being the century of philanthropy. In the decade since the first edition of this book, other huge philanthropies, some in the form of limited liability partnerships rather than tax-exempt foundations, have appeared on the scene—for example, the Emerson Collective, founded by Steve Jobs’s widow, Laurene Powell Jobs; the Chan-Zuckerberg Initiative, founded by Priscilla Chan and her husband, Mark Zuckerberg, a cofounder of Facebook; and Good Ventures, founded by Cari Tuna and her husband, Dustin Moskowitz, also a Facebook cofounder.

In 2010, Bill Gates and Warren Buffet began recruiting the wealthy people of the world to contribute a majority of their wealth to philanthropic causes during their lifetimes or in their wills. As of 2017, the pledge has 158 signers, either individuals or couples. Most of the signers of the pledge are billionaires, with their pledges totaling more than $365 billion.¹

Today, there are almost ninety US foundations with assets over $1 billion; more than two hundred with assets over $500 million; and myriad foundations with assets over $1 million.² Transfers of wealth by gifts and bequests are predicted to increase greatly in the coming decades, with significant portions of the monies going to philanthropy. The philanthropic sectors in China and India and some other countries are also growing. And there also is a growing global interest in novel finance mechanisms, including results-based financing and socially motivated investing—so-called impact investing.

The second edition of Money Well Spent reflects these developments and trends. More important, it reflects the field’s, and our own, growing understanding of how to do philanthropy effectively. We began the first edition when we were at the William and Flora Hewlett Foundation—Paul as president and Hal as director of its Environment Program. We’re proud of the foundation’s leadership in practicing what might be called strategic philanthropy. But at that time, the foundation was close to unique in this practice, and we were learning while doing.

Ten years later, strategic philanthropy is still not pervasive. But it has taken root not only among larger foundations but also in the practice of an increasing number of high-net-worth individual philanthropists. Concomitantly, the infrastructure of the field supporting their work has flourished.

At the same time, our own experience has broadened and our knowledge has deepened. Paul retired from the Hewlett Foundation to return to Stanford, where he joined the Stanford Center on Philanthropy and Civil Society and has been teaching about philanthropic strategy and impact investing at the Law School and Graduate School of Business. Hal moved from the Hewlett Foundation to become founder and CEO of the ClimateWorks Foundation and then to found Energy Innovation, which consults on clean energy for a broad range of philanthropists and organizations. All of these developments have given us new perspectives on the principles and practices of strategic philanthropy.

As in the first edition, a somewhat disproportionate number of our examples are drawn from the William and Flora Hewlett Foundation—not (merely) because it is an exemplary grantmaker but because we worked there and continue to keep up with its activities through friends and colleagues, including Paul’s successor as president, Larry Kramer.

INTRODUCTION

People choose to engage in philanthropy for any number of reasons: to solve pressing social problems, to act on religious or philosophical dictates, to aid the less fortunate, to instill altruistic values in their children, to achieve recognition, or to give meaning to their lives.¹

Regardless of motive, most philanthropists want to use their money to best effect. Yet the history of efforts to improve people’s lives—from reducing drug addiction and high school dropout rates, to protecting ecosystems, to ameliorating global disease and poverty—demonstrates how difficult it is to actually make a difference.

There are three basic requirements for having real impact as a philanthropist: motivation, money, and a winning strategy. You need to bring the first two to the table; this book serves up the third. Strategy matters in philanthropy just as it does in investing, running businesses, and conducting wars. While a good strategy cannot ensure success, it improves the odds—and its absence virtually assures failure.

Effective grantmaking requires strategies based on clear goals, sound evidence, diligent care in selecting which organizations to fund, and provisions for assessing the results—good or bad. Whether you are giving away $100,000 or $1 billion a year, your funds are not unlimited, and a good strategy can multiply their impact many times over.

Our goal is to help you make the world a better place according to your own lights. We do not presume to tell you either how much to give or what passions to pursue.² Those are personal choices. Philanthropic goals are as diverse as individuals’ conceptions of what is good for society. You may wish to promote the arts, religion, education, health, or world peace; protect the environment; or support the search for extraterrestrial life. You may want to stimulate social change, preserve the status quo, or return to halcyon days. While your choice of goals—commissioning symphonies or supporting the destitute—can be debated from a moral point of view, such issues are outside the scope of this book.

Like a car repair manual, a guide to strategic philanthropy is essentially value neutral. The manual can be used equally to fine-tune an ambulance or the getaway car for a bank heist. By (almost) the same token, our book is useful for the pursuit of a wide variety of philanthropic goals, and some people, ourselves included, will regard certain of these goals as wrongheaded or even loathsome. When philanthropy addresses some of the hot-button issues that divide the citizens of our pluralistic society, it is inevitable that one person’s ambulance is another’s getaway car. Indeed, even when goals, such as poverty alleviation or improved education, are widely shared, there may be differences about the appropriate ways to achieve them—for example, voluntary private action versus government spending and policy regulations.

The book arises out of our belief that philanthropy can make a great difference in the world but that much of its potential is not realized. To put it bluntly, hundreds of millions of philanthropic dollars are squandered through donations to organizations that have no impact whatsoever. This is a guide for how to make a difference. It is intended to do for philanthropists what the best books on business strategy do for business entrepreneurs and executives. We wish to provide readers with the concepts necessary to design a strategy to achieve their charitable goals and to assess the strategies of organizations that seek their support. Our fundamental premise is that, as important as the sheer number of dollars devoted to philanthropy may be, intelligent planning, systematic implementation, and continual feedback are even more crucial.

Part 1 consists of a single chapter that makes the case for strategic philanthropy, using contemporary examples of successful and failed philanthropic projects.

Part 2 takes the reader through the steps of developing and evaluating a philanthropic strategy. Its five chapters offer a framework that is essential for achieving results. This is the most technical and academic portion of the book. But if you have time to read only one part of the book, we recommend this one.

Part 3 applies the framework from Part 2 to the actual practice of grantmaking. It begins with determining the scope of your interests and continues with vetting applicants and considering appropriate forms of philanthropic funding, including impact investing.

The three chapters of Part 4 take a deep dive into major ways of achieving one’s philanthropic objectives: promoting knowledge, providing goods and services, and influencing government policies and business practices.

Part 5 covers two constitutive aspects of engaging in philanthropy: the choice of structures—checkbooks, donor-advised funds, and the like—and your spending plan—ranging from giving all your philanthropic capital away in your lifetime or sooner to creating a perpetual foundation.

The book ends with a short Afterword that addresses some concerns about the consequences of philanthropy, strategic or otherwise.

We should disclose at the outset that strategic philanthropy demands serious focus, time, energy, and consultation. As individual philanthropists come to see what’s required to make a real difference, they often conclude that high-impact philanthropy is not a one-person, part-time operation. It usually requires at least some professional staff. That’s why most of our examples are drawn from staffed foundations.

If, as you read the following pages, you decide that you cannot or do not want to do it on your own, and lack the resources or interest to establish a staffed foundation, there are other good options. For example, you can place your assets in a trusted private foundation (as Warren Buffett did), in a strategically oriented community foundation, or in one of the increasing number of funds that manage portfolios of grants. You can mirror grants from a foundation that has a powerful strategy. Or you can become a sustaining supporter of a very-well-managed nonprofit group that has its own strategic focus and discipline.

This book is intended not only for those who amass or inherit the fortunes that make large-scale philanthropy possible but also for the many others who counsel them and help spend their money, including the staff and boards of foundations, the myriad nonprofit organizations that seek philanthropic support, and the increasing number of professionals who advise wealthy clients on philanthropy. It is also designed as a textbook for the increasing number of university courses on philanthropy.

Although we value knowledge for its own sake, this book is written with an instrumental purpose: to improve the effectiveness of your philanthropy with the ultimate goal of making the world a better place. Our theory of change is that this book will help readers who are already strategically oriented become even better and will whet others’ appetites. Doubtless, this is a speculative and somewhat optimistic belief. After all, for every thousand books written with the hope of making a difference in people’s lives, let alone society at large, at most one or two succeed. But we think of our effort in terms of expected return: the probability of impact may not be high, but its potential magnitude is. In any event, writing the book has been a labor of love and voyage of discovery for both of us.

PART ONE

INTRODUCTION TO STRATEGIC PHILANTHROPY

STRATEGIC PHILANTHROPY is synonymous with result-oriented, outcome-oriented, and effective philanthropy. It refers to philanthropy in which donors seek to achieve clearly defined goals, they and their grantees pursue evidence-based strategies for achieving those goals, and both parties monitor progress toward outcomes in order to make appropriate course corrections and ultimately evaluate their success.

The basic imperative of strategic philanthropy is to deploy your resources to achieve your goals most effectively. This calls for approaching the work with a clear-eyed appreciation of the inevitable risks of failure as well as the potential for success. Your chances of success are greatly increased by having well-defined goals and a sound strategic plan to achieve them. The goals describe what success would look like, and the strategic plan details every step necessary to achieve them, including indicators that you are on the right path—or, conversely, that you’ve strayed or lost your way.

This one-chapter part begins with a section on choosing goals and then sets out some contemporary examples of strategic philanthropy.

Chapter 1

THE PROMISE OF STRATEGIC PHILANTHROPY

The Choice of Philanthropic Goals

Since strategy is merely a means for achieving goals, you can’t have a strategy until you have decided what you want to achieve. Some of Hal’s and Paul’s goals for their personal philanthropy, such as combating global warming, are identical. Some differ: Hal cares about protecting the great landscapes of the American West; Paul is devoted to classical chamber music. But, as we said in the Introduction, this book is designed to help you be effective in pursuing your goals, not ours.

Many philanthropists’ goals are determined by particular commitments and passions that motivate and precede their philanthropy. They may come from personal experience or be based on religious, philosophical, or personal beliefs—for example, the effective altruism movement’s argument that charitable giving should be dedicated solely to addressing catastrophic risks and improving the lives of the world’s poorest people,¹ or the idea (which is in tension with effective altruism) that philanthropists have a special obligation to their geographic communities.² For some, the urge to be altruistic precedes particular objectives; they may benefit from an inquiry like the famous What Color Is Your Parachute? approach to choosing careers.

Without suggesting that you should follow Cari Tuna’s and Dustin Moscowitz’s particular path, you may find these young Giving Pledgers’ approach evocative. At the time they made their pledge, Dustin, a cofounder of Facebook, wrote that he viewed his good fortune not as personal wealth, but as a tool with which I hope to bring even more benefit to the world.³

While Dustin devoted attention to building another company, Cari undertook a several-year exploration of their philanthropic goals and approaches. In her own words, Cari wondered how many excellent causes I and other U.S. donors might be overlooking because we had never encountered them personally.⁴ She joined forces with the cofounders of GiveWell, which rates charities that address global poverty, to have in-depth conversations with a broad range of practitioners and funders, and she co-funded grants with more experienced foundations to learn about grantmaking and get a direct sense of the activities and impact of grantee organizations.

Cari and Dustin created the Good Ventures Foundation and the closely allied Open Philanthropy Project.⁵ While the precise language of the foundation’s underlying values has changed over the years, they are captured on its current website:

The primary goal of our giving is to improve the lives of as many people as possible as much as possible. We believe that all lives are valuable, including future lives. These guiding principles have big implications for the foundation’s approach to grantmaking.

Some donors prefer to give closer to home. Some find it helpful to limit their scope to a particular country or region. We think being open to giving in any region is a comparative advantage of ours. Much of the foundation’s grantmaking to date has been focused on the poorest places in the world, where dollars go further toward saving and improving lives. But we’re also funding organizations in the developed world with the potential to increase human well-being at scale.⁶

The website explains: As a new foundation, we’ve decided not to commit to focus areas just yet. Instead, we’re taking time to learn about causes across the major categories of philanthropy—direct aid, research and development, and policy advocacy—in search of important areas on which we could have an outsized impact long-term.⁷ The foundation has set these criteria for choosing causes for grantmaking:

• Importance: What is the problem, how many people does it affect, and how deeply does it affect them?

• Tractability: What are the possible solutions, and do opportunities exist to make tangible progress?

• Crowdedness: Who else is working on the issue? Is it an area that is underfunded (rather than more crowded with donors) where Good Ventures therefore could have a bigger impact?⁸

Many new philanthropists do not have the capacity—or attention span—to engage in anything approaching Cari Tuna’s arduous learning journey. And, of course, you may start with a different set of values and goals. But she provides a model of a thorough process, which can be adapted to fit your own resources.

While Cari worried about overlooking charitable opportunities that she and Dustin had not personally encountered, philanthropy often begins with donors’ personal experiences. For example, when his wife was treated heartlessly by hospital staff, Dr. Harvey Picker, a pioneer in X-ray technology, used the resources of his family foundation in collaboration with the Commonwealth Fund to support research and advocacy that established the idea of patient-centered care.⁹ Bill and Melinda Gates’s exposure to poverty in Africa was a side effect of a safari trip they took in 1993.¹⁰ Ed Scott’s anchor gift to found the Center for Global Development was inspired by a documentary on the disastrous consequences of the World Bank’s and International Monetary Fund’s imposition of austerity measures on developing countries.¹¹

Although Cari and Dustin came out of the gate with incredibly ambitious goals, it is not unusual for people who have acquired great wealth to initially seek safer targets for their philanthropy and only later—if ever—consider bolder and more complex goals.

The Necessity of Strategy

And this brings us to strategy. Whatever your philanthropic motivations and goals may be, a sense of mission, commitment, and passion is essential to every aspect of your work. But for every case where mission, commitment, and passion were translated into impact, there are hundreds where philanthropists acted as if these qualities alone sufficed. Without the capacity to move beyond passion to reason, planning, and execution, the sector would be left largely with well-meaning gestures that confuse good intentions with real effects.

Whether you are concerned with combating global warming, eradicating hunger, curing diseases, or reforming education, you are in for a challenge not just because social change is the product of a large variety of forces that are hard to isolate, much less affect with any certainty, but also because, unlike the financial returns of a business or even electoral returns in politics, philanthropy has no common measures of success. Philanthropy is a field with poor feedback and messy signals—and those signals are often distorted by the pervasive flattery that colors transactions in the money-giving business.

Thus, once you have acknowledged your passions and determined your goals, mind and muscle must come in to design and implement a strategy to realize them. A strategy comprises the unromantic, nitty-gritty working out of the means to accomplish your philanthropic ends. The ultimate goal of a strategy is to achieve impact, which is at the opposite end of the spectrum from good intentions. Impact means making a difference—not in some existential or universal sense but rather in terms of your own philanthropic goals.

Philanthropic Successes and Failures

The chapters of this book are full of real-world examples, intended to give you a sense of the range of the practices and tools of philanthropy and their applications to varied situations. We describe failed as well as successful philanthropic efforts. Grantmaking almost always involves risk taking—sometimes relatively low, as in grants to long-standing service-delivery organizatons; sometime extremely high, as in the case of policy-advocacy strategies—and risk taking entails a chance of failure. The relevant questions are whether the potential reward is worth the risk and whether your strategy is designed to mitigate risks to the extent feasible.

We emphasize failures because philanthropists can learn a lot from failure. As Joel Podolny, dean of Apple University, remarked, Success is a lousy learning environment,¹² and learning from one’s failures is among the core tenets of strategic philanthropy. But you can learn from your failures only if you are candid in recognizing them. With great respect for Krista Donaldson’s leadership of D-Rev in designing products for developing countries,¹³ we couldn’t disagree more with her comment that calling a learning a failure will discourage honesty and integrity—and hinder the pursuit of impact.¹⁴

Taking the opposite point of view, Vanessa Kirsch, founder of New Profit, the venture fund for social entrepreneurs, astutely said, If an organization walks through our door and says they’ve never failed, we’re skeptical.¹⁵ When we were at the Hewlett Foundation, we inaugurated an annual contest for the worst grant from which you learned the most. Because of the foundation-wide learning that came from it, the prize became a sought-after honor rather than a mark of opprobrium. For the same reasons that the foundation’s grantmaking improved by telling it like it was, we believe that yours will as well.

In most instances, it’s pretty obvious when a strategy has failed: the activities necessary to implement a strategy were not carried out or, if they were, did not create the sequence of events necessary to achieve your intended outcome. Seemingly successful outcomes present a particular problem, however. It is often difficult to determine whether a good outcome was the result of your grantee’s intervention or whether it would have happened in any event—what’s called the counterfactual—as a result of other forces.

Why does it matter? Not mainly so that you can feel good (or bad) about your accomplishments—though we wouldn’t begrudge anyone those feelings—but rather so that you and others can learn what works and doesn’t work in order to improve your own performance and that of your grantees.

As we see in Chapter 5, there are some robust methods for testing causality in interventions that provide goods and services such as food, health, and education. It’s far more difficult, however, to assess causality in efforts to influence legislative policy and corporate behavior. To some extent this is inherent in the complex social and political dynamics intrinsic to these interventions. But it’s also a product of the poor level of analysis and transparency of many philanthropic efforts and the tendency, not discouraged by philanthropists, their supplicants, and their peers, to be self-congratulatory.

One noteworthy effort to bring rigor, including counterfactual analysis, to these stories is the Open Philanthropy Project’s commissioned case studies of the history of philanthropy.¹⁶ Our book draws on several cases from this nascent collection. With this background, we examine some examples of different modes of philanthropy with successful, unsuccessful, and ambiguous results.

Fighting Poverty through Service Delivery

The Robin Hood Foundation, whose approximately $200 million annual budget is funded by hedge fund managers and other individual donors, is devoted to fighting poverty in New York City.¹⁷ The foundation has four programs:

1. Jobs and economic security (e.g., microlending, financial literacy, and helping people access public benefits)

2. K–12 education (e.g., high-performing charter schools)

3. Early childhood and youth (e.g., abused children, children aging out of foster care, and early childhood education)

4. Survival/health (e.g., homelessness, emergency food, HIV/AIDS)

The foundation’s grantees are mainly service-delivery organizations, to which it provides capacity-building assistance as well as grant dollars. Robin Hood employs a common metric for assessing grantees’ performance and its own aggregate performance in the first three programs: the boost that a program gives to the lifetime earnings of participants. According to its benefit-cost analysis, every dollar granted has a 12× multiplier effect on outcomes for Robin Hood’s beneficiaries.¹⁸

While the foundation’s grantmaking process calls for a systematic assessment of every applicant’s benefit/cost ratio, this is not the sole basis for making grants. Former chief program officer Michael Weinstein writes:

The ratios are useful guides but they are imprecise. They amount to one of several tools in a funder’s tool kit. Smart funders would no more make grant decisions based solely on the arithmetic of benefit/cost ratios than smart admissions officers at competitive undergraduate colleges would make decisions based solely on the arithmetic of SAT scores. . . . Along with other information, benefit/cost ratios steer a funder toward grantees with the best chance to fulfill its mission.¹⁹

The numbers provide a focal point for discussions about an organization’s effectiveness, but program officers are encouraged to push back on numbers that don’t jibe with their experience or fully capture an organization’s value. The goal is to test the program officers’ judgments against relatively objective numbers and subject the numbers to a reality check.²⁰

Robin Hood is a highly strategic foundation. Its activities are focused on the unquestionably important goal of alleviating poverty in New York City. Though not the only possible measure of success, the individual benefit conferred on a poor person is a perfectly good one.²¹ And though there are strategies besides funding service delivery, including policy research and advocacy, this is a sound, relatively low-risk approach. Finally, Robin Hood’s use of empirical data in its highly transparent decision making is exemplary.²² The foundation holds itself accountable not only for outcomes but for impact—for achieving outcomes that would not have happened but for its grants.

Robin Hood has a large budget, a sophisticated grantmaking process, and a commensurately large staff of about seventy-five professionals who conduct due diligence and provide support to its grantees. Can an individual philanthropist also be strategic in making grants to service-delivery organizations, whether for the benefit of poor families, the environment, music students, or any of the myriad beneficiaries of nonprofit organizations?

Our answer is absolutely yes, but with some conditions. Although you needn’t have a single overarching goal for all your philanthropy, you must have (1) a clear goal for each gift or grant you make and (2) reasonable confidence that the organization is capable of achieving that goal. While the first condition is relatively easy to meet, the second is more difficult because many nonprofit organizations don’t keep track of, let alone divulge, their own progress and outcomes, and there is no third-party service that measures impact for a broad array of organizations.

Absent such indicators, strategic individual philanthropists may imitate the grantmaking of a foundation in which they have confidence or give to one of the increasing number of issue-based funds (see Chapter 11) in which they have confidence. What is not strategic is to give to an organization based on its heartrending appeals, its charismatic executive director, or requests from your friends or business associates.

Reducing Drug Abuse through Community Action

From 1988 to 2003, the Robert Wood Johnson Foundation (RWJF) invested $87.9 million in its Fighting Back initiative to reduce drug and alcohol addiction in a number of disadvantaged communities.²³ Before undertaking the program, RWJF conducted an extensive two-year analysis of past community efforts to address alcohol and drug abuse, which centered around decreasing the supply of drugs mainly through increased law enforcement. Those efforts were characterized by