Giving Done Right: Phil Buchanan on Nonprofits, Democracy, and the Future of Philanthropy

Phil Buchanan, the President of the Center for Effective Philanthropy (CEP)

Phil: Denver, so good to see you. Thanks for having me back.

“And sometimes that’s actually about turning up the heat on government, on business, whether it be in areas like environmental regulations or criminal justice reform. We need these independent actors. It’s a vibrant and important part of our democratic society.”

Denver: Phil, you’ve been a strong advocate for the nonprofit sector describing it as tireless, necessary, and underappreciated. Why do you believe nonprofits are so crucial to the health of a democratic society, especially in today’s political climate?

Phil: Well, I think, we saw in the pandemic the vital role that nonprofits play on sort of spectacular display. Organizations reinvented themselves to be what their community needed them to be in a time of crisis. They did the things that businesses couldn’t or wouldn’t… government couldn’t or wouldn’t, and they stepped up.

And I had this hope in that period that maybe we’d all appreciate the nonprofits in a lasting way a little bit more after what we all went through. And I think that these organizations are taking on the most stubborn challenges, the ones that have resisted solutions, and that we don’t really see many examples of vibrant democracies that don’t have NGOs, nonprofits that can do what others might not.

And sometimes, that’s actually about turning up the heat on government, on business, whether it be in  areas like environmental regulations or criminal justice reform. We need these independent actors. It’s a vibrant and important part of our democratic society.

Denver: You know, in the way that nonprofits morphed, if you will, or evolved, during the pandemic to fill the need, you just said, “I hope that as a result, they would be more appreciated.” Is that hope being realized?

Phil: I don’t really think so. We saw a bit of uptick in trust in nonprofits in the most recent data that Independent Sector put out after a bit of a decline, which was good, but I think there’s more sobering data than anything else.

So, the rates of household giving, percentage of households that gave to charity was about two-thirds two decades ago. It’s under 50% now, and I think there are so many different factors that have contributed to this, including cynicism about institutions generally, cynicism understandable about wealth inequality.

 In a sense, “Well, why should I give? Let’s let the billionaires take care of it.” I think a failure of various folks… I put myself right in there, to do a good enough job communicating to the public at large why this sector matters. And it’s interesting because I do an icebreaker with new employees here when we do a little orientation session.

I hate icebreakers, by the way. But this is one that I break my own rule and I do, and it’s optional because I don’t think it should ever be forced, but I ask people to introduce themselves and to share if they want to: one nonprofit that has made a difference in their life.

And when you frame the question that way, usually we have four or five… we do it every quarter… whoever started in the last quarter, four or five, six new employees, you hear incredibly powerful stories. 

“I worked at a camp with disabled kids, and I learned so much and I grew as a person.”

 “I grew up in a low-income neighborhood, and there was a program that helped promising students get the supports they need to get into a selective college. And I did that.” 

“I volunteered building trails for a conservation organization, and I learned so much.”

You know, you name it, you hear these incredible stories of how nonprofits have transformed people’s lives. Almost invariably, people cry. And yet, we don’t put that together and talk about this sector in a compelling enough way. And so, I worry about that. And I see different leaders, you know, really taking that on.

Akilah Watkins at Independent Sector comes to mind, others, and I’m rooting for them, and I’m trying to do my part, but I think we have a long way to go to help people understand just how vital the sector is and how there are organizations in every community that are often kind of under the radar that are just doing really valuable work, often to support the most vulnerable among us.

Denver: Yeah. So, I guess, you take a look at this decline in giving, not so much as a cyclical blip, but really a pending crisis.

Phil: I think there’s real cause for concern if you look at the sort of trend lines over the long term, but I think we can change it. I believe that we can change it. But I think that the tactics and strategies that we’ve employed to date have not been sufficient.

Denver: Phil, you and your website, cep.org is one of my go-to resources for all things happening in the world of philanthropy. So, let me get your take on a number of issues, a lightning round of sorts, if you will, is that okay?

Phil: Great. I’m up for it, Denver. Bring it on.

Denver: I know you are. So, let’s start with MacKenzie Scott, you mentioned her a moment ago and her approach to philanthropy with really significant unrestricted gifts. What impact do you think her model is having on the philanthropic sector, and are there any potential downsides?

Phil: Okay. It’s got to be lightning. This one will be challenging because there’s so much to talk about. No, I’ll keep it concise.

I remember where I was, you know, it was the summer of 2020 and I’d taken a break between Zoom meetings, and I was watering some plants when outside of my yard in July, I think, and my phone started blowing up because this new donor had emerged onto the scene, making massive, out-of-the-blue, totally unrestricted grants that were at that initial point, in the early year or two, $8 million at the median.

That was the grant size. And just to put that in context, we do a lot of work to survey nonprofit grantees of foundations… the median grant size is about $125,000, and our dataset skews toward the larger staff foundations. So, $8 million at the median, and these were, like I said, out of the clear blue sky. We actually received a gift about a year later.

I thought I was getting pranked by somebody who emailed me, and then they told me, “No, it’s real.” And I still didn’t believe it. I think our CFO after the wire went through, she kept logging out and logging into the bank account just to make sure like she wasn’t dreaming.

Denver: Yeah, it’s still there.

Phil: Yeah. And, I think it’s the most interesting natural experiment in philanthropy. So, what happens to these organizations? How do they spend the money? Are there unintended negative consequences? Are there unintended positive consequences? So, we raised money separately from our gift from her to study this over three years.

And, I think it’s the biggest research effort that I know of… looking at MacKenzie Scott’s giving in particular… at the issue of what happens to these organizations. And what we’ve seen– powerfully positive in the eyes of the leaders of these organizations, allowed them to serve more people, if indeed they serve people to expand programs, improve, programs, innovate, take on new efforts that relate to their mission.

So, programmatic work, but it’s also allowed them to invest in internal capacity, doing things like upgrading technology systems, or just dealing with pay inequity issues, bringing up the lowest paid employees to a better sort of floor. And it’s allowed them to set aside some resources for long-term financial sustainability, whether that’s in the form of reserves, endowment; and most organizations do all three of these things.

Most organizations tell us that this has had a positive impact, not just on their ability to have impact, but also on their internal culture. And we’ve seen a lot of evidence that it affects leaders in powerfully positive ways, emboldening them. And we see that in particular with leaders of color we talk to, which has been very interesting.

And that the feared negatives, and we see a lot of this, and we’ve documented this too in interviews we’ve done with other funders who’ve worried that folks will hit a financial cliff and not be able to sustain their expansion, or other funders will pull back and the fundraising will take a hit.

It’s early. It could change, but to date, our research suggests that those feared, unintended, negative consequences are not coming to pass. Now, there’s other interesting research questions about her giving in terms of the relative lack of transparency, in terms of the effect on the organizations in fields she supports that don’t get funding that I think are really interesting and important that are sort of outside the scope of our research, but that’s some of what we’ve learned through what we’ve done.

“So, I think we just have to be thoughtful and nuanced about when expertise is helpful, when it isn’t, when there’s a balance, and not boil things down too much to: ‘This is always the right approach.’

And I say all that, and I also believe that the trust-based philanthropy movement has been a force for good, but just the asterisk… that we have to remember the nuance that there are times when you might not want to be so trusting…”

Denver: And, by extension, Phil, would it be fair to say that probably applies to trust-based philanthropy at large?

Phil: Well, it’s interesting because trust-based philanthropy has certain tenets that imply an ongoing relationship. And MacKenzie Scott, quite explicitly, isn’t having an ongoing relationship.

Denver: Sometimes, you get 13 cases.

Phil: Exactly right. Exactly right. But for the rest of us, it’s one and done, right?

Denver: Yeah.

Phil: And so, in some ways, her giving tracked some of the principles of trust-based philanthropy. In other ways, maybe not so much. I’m a fan of the shift in practice that the trust-based philanthropy movement has pushed for in general. And, I also think that everything is nuanced and context-specific, right?

So, there are times… trust is also something that builds over time and is earned by both parties in a relationship. So, I tend to be a little bit wary of anything being positioned as always the right way to approach something. And I’ll give you an example… maybe this is a little bit adjacent to trust-based philanthropy.

But people will say, and I totally agree, donors should do a better job listening to those who might be affected by their grant-making strategy. So, for example, if I am a poor person living in a community that is under-invested in, and you’re a funder, and you think you have the solution for economically revitalizing the community in which I live in, I hope you’ll listen to me and people like me before you embark on a strategy.

On the other hand, if I am a potential beneficiary of a vaccine that you are wanting to develop, I really don’t think you should listen to me about how to approach the development of a vaccine because I don’t know anything about that.

So, I think we just have to be thoughtful and nuanced about when expertise is helpful, when it isn’t, when there’s a balance, and not boil things down too much to: “This is always the right approach.”

And I say all that, and I also believe that the trust-based philanthropy movement has been a force for good, but just the asterisk… that we have to remember the nuance that there are times when you might not want to be so trusting, right?

Denver: Absolutely. Yeah. That’s a great distinction. Unfortunately, sometimes we live in a society that is less than nuanced. People just try to get things out with no caveats because they’re afraid the caveats to the people will drift off. So they just say it in a very definitive way and a bit of a reckless way at the same time when they do that because things are more complicated.

Let’s move on to racial equity. We know what a focal point that was in 2020. What steps are necessary to ensure that this focus on equity is sustained, no snap back, and impactful?

Phil: Yeah. This is something that we’ve taken a look at in a variety of different ways too, with our research, but there’s lots of unanswered questions. I think that in the immediate aftermath of the pandemic and the racial justice reckoning, following the murder of George Floyd, there was absolutely a documented shift in philanthropic approaches.

Obviously, we all saw the huge pledges to different organizations, but there were also deeper, I think, conversations within foundations, for example. And we interviewed CEOs and we saw this play out… about what is the role of structural racism in the different program areas in which we work. And how do we make sure we’re addressing that?  Or how do we source prospective nonprofit grantees to make sure we’re not just overlooking folks in different communities?

And we saw and documented a lot of change. Then, of course, we saw the larger pushback against, you know, critical race theory. And then, even the attempt to make DEI appear to be a threatening concept, which I…

Denver: Yeah, a lightning rod. Yeah.

Phil: …have a hard time getting my head around that. But that wasn’t just playing out, you know, on Fox News. It has affected philanthropy. And then, of course, we see the legal cases that have raised issues that have potential, unclear ramifications for philanthropy.

And I think it’s a confusing landscape right now where I could point to dozens of funders where I think I could make a convincing case that they are much more focused on racial equity than they were a decade ago, and that they’re doubling down, and that they’re really doing important work to try to make sure that in this country, your race, or for that matter, your zip code, is not a predictor of your life outcomes, which is great to see.

But then, we’ve also seen some real squeamishness and worry in some folks who have not sustained that focus. And I think that boards are really important in all of this.

Denver: Absolutely.

Phil: Because what we hear from CEOs is: Boards can get in the way, or they can facilitate more of a focus on this issue. And so, who’s on boards matters a lot, as does just this larger cultural conversation we’re having and making sure that we don’t allow our history as a country to be, for lack of a better word, whitewashed… that we recognize the ways in which structural inequities have been baked in from a policy point of view that have direct implications for philanthropists as they think about their goals and strategies.

Denver: You know, it really was brought home when my daughter applied to business school. And, she went out to Booth in Chicago, and it was critically important to visit the campus a couple times to show interest.

And I remember she and I talking about how many people can afford to get on an airplane once or twice to go out to Chicago. And it’s something you never really think about. You just think it’s one of the metrics that they look at. But just by its very nature, it’s discriminatory.

Phil: That’s right. I mean, don’t get me started on higher education in terms of the ways in which these nonprofits, you know, purportedly mission-driven institutions often lose sight of their role in either creating opportunity and closing gaps, or actually widening those gaps.

And, it is precisely those kinds of decisions, the notion of demonstrated interest, which is, of course, at the undergraduate level, that’s all about these schools trying to increase their yield on extended offers so that they can extend fewer offers, so that they can look more selective, so that they can appear higher in the U.S. News & World Report college rankings or whatever it is. And someone’s got to speak up in that boardroom and say, “Wait, what are we here for?”

Denver: Yeah.

Phil: And remember that as a board member, yes, you have a duty to the organization, but really, your duty ultimately is to the mission. And I think this applies to boards of nonprofits more generally to, as Anne Wallestad, the former CEO of BoardSource, said in a fabulous article that she wrote a few years ago in Stanford Social Innovation Review on the Purpose-Driven Board: Stop and think about the larger purpose and your role in the ecosystem, as opposed to just taking the parochial, organizational view, “What is best for our brand? What is best for our positioning?” Ultimately, what’s different about nonprofits is that that isn’t the be-all, end-all.

Denver: Okay.

Phil: The be-all, end-all is the mission and the impact, which involves collaboration across different entities.

Denver: No question. It’s a hard way to get people to think differently between board members because they’re so conditioned to thinking about their own organization.

Phil: Absolutely.

Denver: Like how many people did we feed? But if you keep on thinking that way, you’re never going to cure hunger. You’re never going to be able to address it. So, it is a mindset shift.

Let’s turn to CEP’s new report, BRIDGING THE GAP: Grantee Perspectives on Intermediary Funders, and that addresses grantee experiences with intermediary funders. What did it reveal, Phil?

Phil: Yeah. The reason we wanted to look at this is that there’s been such growth, and Bridgespan has documented this and I think been a player in it, as have others such as Arabella, in the use of intermediaries of various kinds by foundations and individual donors.

So, these are institutions that are, or sometimes pooled funds, formed around a common interest that multiple donors have, and then funds are regranted out, and we’ve seen an increased use of those vehicles.

And sometimes, what gets articulated as a reason or a plus for giving in this way are things that relate to the relationship with nonprofits. “We are going to be closer to the ground and able to work better with these organizations. We are going to be able to have a sort of different sensibility than the originating funders.”

And a lot of assertions have been made, and some of them may be right, but no one’s really looked at the nonprofit experience. And the nonprofit experience, it turns out, at least with the set of intermediaries whose grantees we’ve surveyed, which is so just, full disclosure, only 24, but it is several thousand nonprofits across those intermediaries, and when we compare them to the tens of thousands of nonprofit experiences with hundreds of foundations and other grant-making institutions whose grantees we’ve surveyed, what we see is actually that there’s not that much of a difference in the experience.

And I think that’s important, because what it tells us is that the structure is not the silver bullet, right? That you can be a grant-maker structured in a variety of ways, and you can still do well or not as well in the eyes of your grantees and in terms of their experience.

So, as my colleague, Dr. Elisha Smith Arrillaga, who’s our VP of Research, put it, “It matters who you choose. Use an intermediary, but be thoughtful about it. Don’t assume that the creation of an intermediary automatically gets you different results.”

So, there are lots more research questions to look at, but we just think it’s always really important whenever something is happening and people are assuming that there are certain benefits that are achieved to bring data to bear and say like, “Are we seeing those benefits?”

And, again, for some intermediaries, absolutely, there’s some exemplars in terms of the way they work with their nonprofit grantees, but there’s also folks who are not doing it as well, and it’s important to take a look and see what we can learn from that data. So, that’s why we did that analysis.

Denver: That’s what I love so much about CEP. You never make assumptions. You say, Let’s find out and dig in a little bit and maybe it won’t show any difference, but you never know, you know?

Phil: We try. Yeah.

Denver: And you do the work, and that is really great.

Hey, donor-advised funds, where do you stand on this ongoing debate surrounding those, you know, particularly regarding payout rates and transparency?

Phil: Oh, yeah, it’s like the third rail of conversations in philanthropy. Here’s what I think. Donor-advised funds are obviously hugely popular, and I think they can be a really useful vehicle.

But I would hope that DAF providers would try to influence the individuals with DAFs at their institutions, whether it’s a community foundation or a commercial DAF provider like the Fidelity Charitable. Full disclosure: Fidelity Charitable is a sponsor of our podcast and a grant funder of CEP’s therefore. Try to influence donors to really get the money out the door, not just have it sit there, and to be as effective as possible and to focus on really important issues, and provide resources to help them do that.

I don’t have a view on the policy piece. I am sure there are opportunities for consideration of improvements in that area. But I think that really the most powerful lever right now, given the relative unlikelihood of policy change, I think, is for DAF providers to put their mission first, their focus on impact first, and to try to influence the individuals who have DAFs in ways that are consistent with that focus on impact.

And I think that means things like having meaningful dormant accounts… you know, policies… having resources that donors can benefit from or, you know, at the community foundation level, we’ve seen some really inspiring examples of community foundations that are saying like, “Hey, thanks for opening up a DAF here. We got certain priorities based on our analysis of what’s going on in this community. If you align your DAF with those priorities, you’re going to get a whole different level of attention and service. And, let us tell you why those priorities should matter to you.”

And I think that’s good as opposed to just being a kind of passive transactional, relationship.

Denver: Yeah, it has been amazing what’s happened, at least, I’ve witnessed in community foundations. The thing that struck me at community foundations is that the leadership was there forever. I mean, almost everyone I spoke to, you know, the former CEO had been there 30, 35 years.

You have a whole new generation of CEOs coming into community foundations, and their focus is less on bringing more money in the door and more on where that money is going and the impact they can have on different programs.

And instead of, as you just said, being so passive about it, “Hey, we got some ideas.” You know what I mean? And it’s just been across the country all at once, and it is quite inspiring to see.

Phil: I cannot agree more.

“I’ve come to believe that philanthropy can be an amazing way of strengthening connections across generations within families. And it’s anecdotal, I admit it, I don’t have large scale data on this, but I’ve seen enough powerful examples that I hope others will be inspired to have those conversations.”

Denver: Next Gen donors, are they changing the philanthropic landscape? Of course, they are. And what implications does this have for established foundations and nonprofits?

Phil: Yeah. No, I think that’s right, and I think they are changing things, and I think it has real implications. I mean, I’m always a little wary of generalizing about generations. People love to do it. And I never know whether the generalization is true of the generation, or it’s just true of the stage of life that people are in, right? And it gets confusing.

Denver: Well, I’ll tell you one thing, our kids hate it. I mean, when you speak to your children, you thought you try to generalize; they don’t go for that at all.

Phil: No, no, exactly, exactly. I mean, yeah, I absolutely see that with my daughters. I mean, there’s the whole range of human experience, you know, within any generation. But I think that the thing that interests me is the relationships and connections across generations.

And what I mean by that is I’ve seen, over the course of co-hosting this podcast, Giving Done Right, that I do with my colleague, Grace Nicolette, incredibly powerful examples of money, which we usually associate with family discord, being a bond across generations when the discussion is about: How do we allocate that money for good?

And so, I’m so inspired when I talk to donors like someone we interviewed recently, Vivian Long, second generation, and she talks about the way her generations’ priorities in her family foundation have influenced her parents, and her parents have gotten interested in things they didn’t even know they were interested in when they set up the foundation.

And the kids have also learned about their parents’ interests. And rather than being a source of tension, it’s been a source of growth and connection for them. And I’ve heard this story many times over that’s sort of counter to, you know, our images of the family on Succession, you know, at each other’s throats, right?

I’ve come to believe that philanthropy can be an amazing way of strengthening connections across generations within families. And it’s anecdotal, I admit it, I don’t have large scale data on this, but I’ve seen enough powerful examples that I hope others will be inspired to have those conversations.

Denver: Yeah. You know, and I would also add that’s true in the workforce.

Phil: Absolutely.

Denver: Sometimes, we do not appreciate having four or five different generations at one time in the workforce. And to get the best of all of them together, you’re going to come out with something, which is just going to be, you know, rocket fuel.

Phil: Especially in our society in which, for various reasons, including the decline in religious affiliation and other dynamics, people tend to self-segregate by generation or age in a way that I think deprives us all of the benefit of learning from somebody decades older or decades younger.

Denver: Yeah.

Phil: And, I think, to your point, the best work cultures, and this is certainly something I think about in the context of CEP, try to cultivate that connection and those relationships in ways that enrich everybody.

Denver: Yeah. It is incredible how we’ve segregated ourselves as a nation by age. It is nuts, but we have done it.

Just two more. How is technology reshaping philanthropy? And what emerging trends do you think will have the most significant impact on the sector?

Phil: Well, I mean, my answer is completely unsurprising. I think.  AI, which is a, you know, umbrella term that covers a whole lot. So, recognizing the sweeping nature of that term, but it has huge potential for harm and good.

But the ways in which we can harness machine learning, for example, to bring data and information that is useful to those who need it in times of need, I think there’s huge, huge opportunity there, and we’re only just beginning to understand that.

So, I am really interested in the work of folks like Vilas Dhar at the McGovern Foundation, which is exploring this issue, and they have countless really, profoundly positive examples of the harnessing of these new technologies for good.

I am also simultaneously really concerned about the potential flip side of that, particularly as is so often the case, just a few companies are making decisions that shape so much of our experience. And I think the nonprofit sector also has a crucial role to play in advocating for guardrails and regulations that make sense and that will protect us.

Denver: You know, I think every sector’s looking for a unique contribution, and this is one time when the nonprofits can lead the others by bringing those ethics and guardrails to issues at hand. And I think it’s what we should be doing, in addition to using it to the extent that we need to.

Phil, you wrote a wonderful book several years ago titled, Giving Done Right, which is also the name of your podcast. Now, you’re about to kick off season four. Congratulations.

Phil: Thank you.

Denver: Tell us what’s been exciting this year, and what do you have in store for listeners?

Phil: Yeah, it’s been really fun to do this podcast with my colleague, Grace Nicolette, who’s our Vice President for Programming External Relations. It started in 2020 when we just realized we’re all trapped at home and it’s harder to reach people. So, why don’t we start a podcast!

And I think, the first season, you know, Grace did the interviews from her closet, and I was in my dining room. And, now, we’ve upped the professionalism a little bit. But what we’re doing on the podcast is exploring what it means to give effectively.

And we’re doing it with donors like Vivian Long, who I mentioned, who’s a really interesting person involved in her family philanthropy; folks like Darren Walker, and we asked him to reflect on “Okay. You’ve said you’re stepping down from the Ford Foundation. What lessons have you learned?”

But also, nonprofit leaders, we really try to highlight folks that people might have never heard of, who are doing just really interesting, heroic, work and different models. So, for example, this season, we have Jesús Gerena, who runs UpTogether, which does direct giving to people in poverty.

So, people think of GiveDirectly, and we have the co-founder of GiveDirectly on a previous season. But we wanted to look at direct cash transfers in a domestic context.

But, you know, across the podcast and all the interesting conversations, there’s certain themes that we just keep coming back to that I think are really important for donors to grapple with and think about as they try to be effective. So, we’ve been pleased about the response.

I used to joke that I worried that there were more people with podcasts than people who listened to them, but we’ve been able to get some traction with the help of our various partners and feel like it’s been a worthwhile way to engage people.

Denver: And you’re going to expand this season significantly, right?

Phil: Yeah. So, it’s our longest season, it’s 16 episodes, and it starts September 19th, the first two come out, and then every Thursday from there.

Denver: Fantastic. Well, if you’re interested in staying informed about what’s happening in philanthropy and how to improve its effectiveness, make sure to put in cep.org into your regular rotation. And don’t forget to tune in to Giving Done Right on Apple, Spotify, or your favorite platform. Sixteen new episodes this year. That’s fantastic.

Phil: Thanks, Denver.

Denver: I want to thank you so much, Phil, for joining us today. As always, it’s been a pleasure to have you on the program.

Phil: Denver, you’re always so fun to talk to. I appreciate you and your good questions.

Denver Frederick, Host of The Business of Giving serves as a Trusted Advisor and Executive Coach to Nonprofit Leaders. His Book, The Business of Giving: New Best Practices for Nonprofit and Philanthropic Leaders in an Uncertain World, is available now on Amazon and Barnes & Noble.