Modern Philanthropy: The Challenge of Effectiveness

Modern Philanthropy: The Challenge of Effectiveness

One hundred years ago, Andrew Carnegie famously declared that a person who died rich, died disgraced. Then he proceeded to change the nature of philanthropy in America and the Western world.

Along with John D. Rockefeller and a number of extraordinarily rich individuals who had amassed great wealth around the turn of the 20th century, Carnegie showed the way toward using their vast fortunes to benefit society, providing unprecedented large grants to a range of causes and issues.

More importantly, however, they showed how big ideas and Carnegie and Rockefeller's ideas were as big for their time as those of Gates, Ford, or Pew's are today and sharp strategic focus can produce transformative change. In so doing, they set the course for modern-day philanthropy.

Today, we find ourselves in the midst of another great period of capitalist expansion, and the changes underway in American and world philanthropy at the turn of the 21st century promise to be as profound as they were in Carnegie's day.

Indeed, the explosive growth of American philanthropy has created a new, formidable force in the world. Over the past thirty years, the total philanthropic endowment of American foundations has grown from about $30 billion to well over $500 billion, the total number of charitable foundations has increased from about 22,000 to almost 70,000, and the total number of nonprofit organizations devoted to societal good has doubled from about 700,000 to more than 1.4 million.

That represents a sea change in terms of the potential impact of philanthropy. And with it comes a great responsibility to use these resources wisely and well to advance a just, equitable, and humane society for the benefit of Americans and the world.

Those of us who work in foundations understand this responsibility and take it as a high trust. We also know that, increasingly, it comes with a great deal of public scrutiny. The media has re-discovered philanthropy and covers it intensely, as well they should. Across the country, legislatures and attorneys general are devoting more time and resources to questions of foundation and nonprofit governance, and this, too, is appropriate given the public-trust arena in which we operate.

In our nation's capital, Congress has served notice that it will continue to closely examine its regulatory role with regard to the nonprofit sector. It is our job to work skillfully with members of Congress to ensure that proper oversight does not turn into over-regulation of the sort that could strangle philanthropy's promise.

Indeed, questions of good governance, accountability, and strong ethics are central to our mission and success. We all must become expert in managing these public-trust issues, as well as skilled in collaboration and communication, in order to ensure that the public and its representatives fully understand our work and the requirements for its success.

In addition to issues of governance and accountability, there is another plane upon which we will be judged one that has yet to become the focus of press or legislative attention. But mark my words, it is coming.

I am referring, of course, to the issue of effectiveness the question of how well we are using our resources to benefit society. In other words, are we wasting great amounts of money and effort, or are we investing wisely and well in creating a better future for our children and grandchildren?

During the 1980s and 1990s, American business made great strides, at considerable human and financial cost, toward becoming more efficient and effective. It was painful for those of us who were in the for-profit world at the time. But it clearly resulted in an America better able to compete in an increasingly global economy.

Those same sorts of demands for efficiency and effectiveness will surely challenge the American nonprofit sector over the next ten to twenty years. And it will be our job to manage the process thoughtfully and skillfully so that it benefits both philanthropy and the broader society at large.

We must, however, be careful. We are not the same as the for-profit world, and we must protect our distinctive strengths. This has been and will be the thrust of the work of the Council on Foundations and its partners in the nonprofit sector. Together, we must ensure that we are managing our dual responsibilities ethics and effectiveness in such a way as to earn and hold the public trust and to advance the promise of philanthro

Maxwell King, president of the Heinz Endowments in Pittsburgh, Pennsylvania, is chair of the Council on Foundations. This commentary is adapted from a plenary speech he delivered at the council's recent annual conference in Seattle.