5 Steps for Better Strategic Giving
By Eric Kinaitis
Whenever a new year begins, it brings with it the end of the “panic” season; the rush of phone calls from clients eager to determine the best ways to get the greatest tax savings before the calendar year ends. For many clients and their advisors, these calls led to discussions on how best (and how much) to give away to charity.
The fact that these conversations may have only happened at year-end illustrates a potential problem: that decisions made quickly at the last moment may have not been made with the depth of judgment that they may have needed to maximize their true effectiveness.
Bruce DeBoskey, a nationally-recognized expert in strategic philanthropy and a regular contributor to The Denver Post provides this insight to donors on how to get the best out of their philanthropic efforts. He writes:“Donors who wish to truly maximize the impact of their giving must develop a strategic rather than a random approach to philanthropy. As with any important decision — investment, business or personal — a thoughtful longer-term strategy enables you to determine what you want to achieve and how to do so effectively. Following these five key steps will help you get the most "bang" for your philanthropic buck.
1. Engage family and determine the reasons for giving.People engage in philanthropy for many valid reasons — including gratitude, theology, altruism, recognition, influence, tradition, tax planning, legacy creation, passing values to the next generation, social pressures and guilt. Engaging family members across the generations in meaningful discussions about what motivates your giving is an essential first step to developing a strategic giving plan.
2. Identify desired outcomes and focus on impact.Philanthropy seeks either to preserve something of value to the donor (such as forests, symphonies, libraries, democracy or community) or to improve something that needs to be changed (such as reading, equality, environmental degradation, health, education and opportunity), or both. A narrow focus on a limited number of causes enables donors to have a greater impact, derive more meaning and satisfaction, and become more personally involved in the desired outcomes. 'Go deep, not wide' is a mantra of strategic philanthropy.
3. Seek 'best in class' nonprofit partners.With more than 1.5 million nonprofit organizations in the United States, it is difficult to determine which are truly effective at designing and implementing programs that actually achieve their missions. Before donating to a nonprofit, research its effectiveness, financial sustainability, professional and volunteer leadership, responsiveness to shifting needs, engagement of beneficiaries and other stakeholders, the theory of change deployed, and the difference actually made (rather than just the activities undertaken).
4. Make sure all philanthropically committed capital achieves your mission.In the U.S., more than $800 billion currently resides in foundations and donor-advised funds. That money is philanthropically committed to mission, has received a federal tax deduction and cannot be returned to the donor. Each year, just 5 percent to 20 percent of those funds are distributed to nonprofits. The remaining capital is invested in public and private markets, usually for the sole purpose of financial growth. The goals of these investments may not match and may even counteract your philanthropic priorities and objectives. Take steps to ensure that these investments do not contradict — and hopefully further — the foundations’ or donor advised funds' charitable mission and utilize all of your philanthropic capital to achieve your charitable goals.
5. Evaluate and make changes as needed.Philanthropy that makes a real difference over time is difficult to do well. It takes more than a spate of year-end check writing. Effective philanthropy requires persistence and a willingness to examine not only successes, but also failures. Changing circumstances and unanticipated events or participants all require a philanthropist to continually learn and adjust a strategy — even while it is being implemented. Legendary Chinese military general, strategist and philosopher Sun Tzu said: ' Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.' “
Engage with your clients to better understand their charitable interests and lead them through the five points. The time taken will not only position you as a strategic partner in helping your clients better manage their charitable giving, but as a reliable guide that they can trust in other areas of their broader financial well-being.
At American Endowment Foundation, we look forward to discussing the circumstances of your client and how we can help provide deeper strategic thought to their charitable gifts. Contact us or call at 1-888-660-4508.