Editors’ Note: With this post, Paul Brest and Hal Harvey launch HistPhil’s forum on the second edition of their book, Money Well Spent (2008, 2018). In a separate post, HistPhil co-editor Maribel Morey introduces the forum and its contributors. Below, Brest and Harvey reflect on changing intellectual currents among philanthropists and philanthropic organizations since their book’s first publication in 2008; and with the publication of a second edition earlier this summer, they share their hopes for the future of philanthropy.  

Philanthropy has undergone some significant changes during the past decade. The publication of the second edition of Money Well Spent provides an occasion to reflect on these developments and sketch our hopes for the future of philanthropy and for the social sector more generally.

We began working on the first edition (published in 2008) while at the William and Flora Hewlett Foundation, which then was one of a small number of foundations committed to an outcomes approach, often called “strategic philanthropy.” Whatever its name, the core of this approach involves defining goals clearly, pursuing evidence-informed strategies to achieve them, monitoring progress in order to make appropriate course corrections, and evaluating ultimate success.

Perhaps the most important development has flown under the radar—the increased adoption of an outcomes approach by both existing and new philanthropies such as the Arnold, Gates, Irvine, Moore, and Packard foundations, the Pew Charitable Trusts, and the Open Philanthropy Project. (The most highly publicized philanthropic development, the Giving Pledge, valuable as it may be, is concerned with the quantity rather than the quality of philanthropy.)

During this period, Effective Altruism (EA) appeared on the scene with its argument that philanthropy should be devoted to doing the most good by aiding the world’s most disadvantaged people and averting global catastrophes. Although an outcomes approach is applicable to any and all philanthropic causes, it is highly congruent with EA’s utilitarian methodology.

Through GiveWell, EA has advanced impact evaluations of service delivery programs—though with the side effect of accentuating their cost and difficulty. GiveWell’s Website rightly notes that conventional evaluation techniques do not readily apply to advocacy for systems and policy change. All other aspects of an outcomes approach do apply, however. And despite dire predictions that a focus on outcomes would favor short term results over uncertain policy changes, some of the most strategically oriented funders, including most of those mentioned above, have made big bets in advocating on issues like climate change, criminal justice reform, and LBGTQ rights.

Impact investing, which was only a nascent field ten years ago, has blossomed to such an extent that an entire chapter of our second edition is devoted to it. We are neither cheerleaders nor antagonists, but critical friends. While impact investing has tremendous potential to scale social interventions aiding the poor and protecting the environment, impact investors—encouraged by fund managers—can readily delude themselves into thinking they’re impacting these issues when their investments are not moving the needle at all. The impact investing industry has at best ignored, and at worst resisted, evaluating impact.

While the power dynamics between funders and grantees is a perennial issue, the value of “constituent voice” or “listening to those who matter most, the beneficiaries” (to quote an important 2013 article) emerged at the same time that human centered design moved beyond product design to provide useful techniques for understanding the motivations and behaviors of beneficiaries. The Fund for Shared Insight and its Listen for Good (L4G) initiative are explicitly aimed at listening to their beneficiaries.

This period has also seen a proliferation of books and articles, as well as university and post-graduate courses, incorporating an outcomes approach. (Lest this blog be seen as shameless promotion of Money Well Spent as a textbook for such courses, Paul’s free online course covers strategy and evaluation in depth.)

In sum, the decade has continued a monotonic but uneven trend to increase philanthropy’s ability to achieve social outcomes—but no significant acceleration. We agree with Mario Morino, a savvy participant-observer in the sector, who writes:

I’d like to believe that this progress is a sign of pervasive disruptive transformation throughout the social sector. I’d like to believe that the majority of nonprofits are now poised to materially improve their impact by being more analytical about causal relationships and how they assess their performance. I’d like to believe that the majority of funders are poised to make decisions based on evidence and merit rather than loyalty, stories, and relationships. Yet the reality—in absolute terms—is that the promising developments . . . still touch only a small minority of nonprofits, foundations, and donors.

What are the barriers to further progress? While the concepts underlying an outcomes-oriented strategy are not intrinsically difficult, they are not intuitive for many philanthropists and nonprofit leaders. Developing a theory of change requires a degree of intellectual discipline that seems in short supply. And this comes before the challenging task of using evidence to assess the strength of the causal links in a theory of change.

Many philanthropists are satisfied with the “warm glow” of charitable giving. Indeed, knowledge about their grantees’ mixed results may be demotivating. Moreover, many funders are averse to paying indirect costs, or overhead expenses, for their grantees’ strategic planning, monitoring, and evaluation. They may be subject to the psychological phenomenon of “overhead aversion.” Or perhaps they just want a free ride. Beyond compromising an outcomes approach, the failure to pay overhead pushes organizations into a “nonprofit starvation cycle.”

What could help move beyond these barriers? The availability of impact data will likely improve over time, but the persistent challenge lies in encouraging philanthropists to adopt an outcomes approach that can make good use of the data. This will require the diffusion and practice of professional norms of philanthropy.

The norms of most professions or callings are undergirded by accountability to peers, other stakeholders, or regulatory authorities. While philanthropists are subject to regulation on certain organizational, procedural, and ethical issues, they are not regulated with respect to outcomes—and that’s a good thing, given the costs that regulatory incompetence and politics would impose on the valuable diversity of American philanthropy and civil society. Yet, in the absence of regulation, only a small minority of donors seem to adhere to norms of effectiveness, and there is no movement toward meaningful peer review.

So we come to the question of how the sector could accelerate progress toward outcomes in the absence of regulations. Here are some relevant factors:

• Common principles and practices. Whatever their differences, many of the recent books, articles, and courses converge around a set of outcomes-oriented norms. These are succinctly captured by the Impact Driven Philanthropy (IDP) Principles and Practices developed by a group of funders, donor educators, and nonprofit leaders.
• Education about an outcomes approach. Very few donors participate in formal education programs. More, however, take part in giving circles like Social Venture Partners International and SV2 that combine grantmaking with peer-to-peer education. These opportunities could be increased.
• Certification of competency. At present, literally anyone can print the words “philanthropic advisor” on a business card. But for every advisor who actually contributes to a philanthropist’s outcomes, dozens lack the capacity to provide any help at all. The existence of the National Network of Consultants to Grantmakers indicates that there may be some demand for certification that philanthropists could require of advisors, consultants, and staff members. But a robust certification process must be rooted in a foundational curriculum that includes a core set of principles and practices such as IDP.
• Transparency. Transparency about an organization’s strategies opens its work to scrutiny by various external stakeholders. The Center for Effective Philanthropy offers foundations the opportunity to obtain grantees’ feedback from a Grantee Perception Report (GPR). Most of the GPR’s questions do not directly pertain to effectiveness, however, and most foundations do not make their reports public. GrantAdvisor, a Yelp-like service that does not require the foundation’s cooperation, focuses more on relationships and accessibility that effectiveness. Unfortunately, the growth of donor-advised funds and limited liability corporations in lieu of foundations offsets what modest transparency currently exists. We don’t see a ready solution to these problems.

In Good Work: Where Excellence and Ethics Meet, Howard Gardner, Mihaly Csikszentmihalyi, and William Damon describe journalism as a domain that has developed professional practices concerning accuracy and fairness even though accountability is weak (granted that some journalists have no standards at all). The authors suggest that, while journalists have developed their practices mostly on their own or with peers or mentors, good practices can be taught and shared.

In our most hopeful vision for the future, philanthropists and nonprofit leaders—like journalists—would identify as members of a calling with common standards of excellence. Perhaps we’re already on this path, but the movement could be accelerated by a concerted field-building effort along the lines of the successful initiatives to build the fields of bioethics, end-of-life care, and conflict resolution.

Those fields have had the benefit of practitioners who identify themselves as professionals. Although an increasing number of nonprofit staff members identify in this way, many high net worth donors who make their own philanthropic decisions do not.  The challenge for the next decade is to imbue them with a sense of professional belonging—of which an outcomes approach is a fundamental element—while at the same time acknowledging the legitimacy of their diverse substantive goals.

-Paul Brest and Hal Harvey

Paul Brest is Former Dean and Professor Emeritus at Stanford Law School, a Lecturer at the Stanford Graduate School of Business, Co-Director of the Stanford Center on Philanthropy and Civil Society, and Co-Director of the Stanford Law and Policy Lab. He was President of the William and Flora Hewlett Foundation from 2000-2012.

Hal Harvey is the CEO of Energy Innovation, a San Francisco-based energy and environmental policy firm. Previously, he was founder and CEO of ClimateWorks Foundation, a network of foundations that promote polices to reduce the threat of climate change; Environment Program Director at the William and Flora Hewlett Foundation; and founder and President of the Energy Foundation, a philanthropy supporting policy solutions that advance renewable energy and energy efficiency.