Risk – A Very Personal Perspective

Ahead of our bridging philanthropy and development forum next week, Adrian Sargeant, Professor of Nonprofit Marketing at Bristol Business School, tells us why philanthropy needs to become more accepting of risk - and why trust is so important: 

"One of the key conclusions from the last Bellagio Summit was the philanthropy needs to become more accepting of risk. Governments, it was argued, are ill placed to take risk because of the discipline imposed by elections and/or the impact that a failure might have on the careers of officials deemed to have ‘squandered’ public resources. Equally, while many new forms of social enterprise can and do take risk, they frequently can’t take the kind of risks necessary to achieve systemic change because of the need to secure some form of financial return. Philanthropy, by contrast, can assume a greater degree of risk, engaging in projects that offer the potential to transform an entire development ecosystem.

Unfortunately, they appear not to and the evidence that philanthropists are risk averse is not just anecdotal. A Bank of America study of philanthropy (2010) tells us that virtually no high value philanthropists want to take substantive risks with their philanthropic assets (a mere 3.8%). To compound the issue it seems that philanthropists are more risk averse with their philanthropic assets than they are with their personal financial assets. Some 26% are not willing to take any risks with their philanthropic assets, compared with only 10% who take a similar view of their other financial investments.

So why should this be? There are a multiplicity of possible motives for supporting philanthropic initiatives, but one notable motive in this context is what the economist Andreoni refers to as the ‘warm glow’ that derives from giving. Individuals, quite understandably, want to feel good about their philanthropy and thus select projects that will best deliver this feeling of self-worth. As human beings we are naturally drawn to short term certainty and rather than convince us otherwise, many in our nonprofit community have been beavering away,  actively encouraging this perspective. Instead of being honest with people about the work we should be doing, we’ve focused instead on projects that offer our supporters the greatest prospect of feeling good, neglecting the real interests of the communities we serve. As a Professor of Fundraising I read many appeals, but I can’t recall the last one that opened with the glorious headline – we’d like you support this because it might just solve a long term problem, but the chances of it working are slim.  

The desire to feel good may also play a role in the context of small business or family foundations, where the decision making unit is small and individual passions predominate. It offers less insight though into the behaviour of larger and multi-national foundations. These organisations too, can be risk averse. There are a variety of reasons why this might be the case ranging from the inadequate training or support of key personnel, to the continuation of a culture which fails to regard occasional failure as an essential precursor to successful innovation. From my personal perspective however, I am struck by the current fervour within the sector to adopt ever more of a commercial approach to grantmaking. Impact evaluation and assessments are now the order of the day, with a concomitant rise in the use of often meaningless metrics that are unaligned with genuine community need and/or the drivers of long term prosperity and wellbeing. We seem to have become obsessed with the imposition of ever greater management controls, many of which stifle innovation and deplete a critical force at the very core of our sector’s existence. In short we’ve forgotten trust;  how to trust, the different kinds of trust, and why trust is so important."

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Philanthropy as Development

Rob Garris, Managing Director for Bellagio Programs at the Rockefeller Foundation, tells us more about the upcoming forum and introduces some of the main topics that will be discussed in Bellagio later this month:

"Last November at the Rockefeller Foundation Bellagio Center, Awkasi Aidoo of Trust Africa encouraged us not to think about doing philanthropy for development, but instead to think of “philanthropy as development.”  His comment carried a lot of meaning: philanthropy should be embedded in emerging economies and build on local traditions of giving and mutuality so that new wealth is shared, and shared wisely.  Philanthropy should seek to solve underlying causes of poverty.  Philanthropy should, as John D. Rockefeller suggested in 1913, improve human well-being around the world.  

The diverse participants from philanthropy and development at last year’s summit shared broad goals and values, but have different ways of working and different understandings, sometimes, of the worlds in which we work.  We are excited to partner with Resource Alliance to continue this conversation, again at the Bellagio Center, just a few weeks from now. 

Last year, we  asked an experienced group how to improve human well-being through collaboration and cross-learning between philanthropy and development. This year we have invited a group of new philanthropists, primarily from Africa and Asia, to work through some of the themes that emerged last year from the perspective of their own work.   On the table for discussion: how to balance risk and opportunity to maximize results; how to build trust with partners;, and how to spot and build on community-based innovations? I also expect we’ll generate new questions and hopefully offer a few answers, too.

We hope that our guests will teach and learn from each other, and sharpen our thinking on these issues.  We’ll share with you here and on Twitter what we learn as the discussions unfold.  Stay tuned!"

 

Introducing bridging philanthropy and development

Working with the Rockefeller Foundation, the Resource Alliance is hosting a forum to convene new philanthropists from Asia and Africa and development practitioners.

The forum takes place at the Bellagio Center in Italy from 26-29 June 2012, and will explore how development issues in these regions can influence and engage philanthropists as well as systemic factors that can create opportunities and risks for philanthropists.

Neelam Makhijani, Chief Executive at the Resource Alliance, tells us more about the event -- and how you can participate, in person or online.