It’s Not Your Grandfather’s Charitable Organization Anymore

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The world of philanthropy and social impact is undergoing rapid change. Notable developments include the rise in entrepreneur donors, deeper networks driven by technology and a new cooperative attitude that is blurring the lines separating non-profits, for-profits and governments. Andres Spokoiny, president and CEO of the Jewish Funders Network, explains where this fast-paced evolution is heading in this Knowledge@Wharton podcast. 

An edited transcript of the conversation follows.

Knowledge@Wharton: We’re pleased to meet today with Andres Spokoiny, who is the president and CEO of the Jewish Funders Network, an umbrella organization for large philanthropic and social impact groups devoted to causes that support Israel and Jews globally [and many non-Jewish-related causes]. Thanks for joining us today, Andres. Would you explain further what the Jewish Funder Network does and how big its reach is financially?

Andres Spokoiny: The Jewish Funders Network is a peer network of funders, not only large funders, actually, it’s funders that give from $25,000 a year each to mega funders that give hundreds of millions every year. It’s a philanthropic network that has a lot of varied interests from the ones you mentioned, the Jewish community, Israel, etcetera, but not only. Most of our members actually fund non-Jewish causes. I would even venture to say that the majority of what they fund are non-Jewish causes. What unites them, though, is that they believe that their philanthropy is somehow informed by their Jewish identity or their Jewish values, they believe in strategic philanthropy and they believe that it takes a network, that it takes working in partnership and in collaboration to really affect change in the world. We have around 1,000 members. It’s really hard to know their total philanthropic capacity, but it’s several billion dollars in philanthropic assets.

Knowledge@Wharton: How does the kind of philanthropic and social impact that your group does differ from the way things worked five or 10 years ago?

Spokoiny: The Jewish Funders Network, itself, and this is a clarification that is absolutely important, does not fund anything. It’s our members, the funders themselves, who choose to fund whatever they choose to fund. I think that the biggest change goes hand in hand with changes in the society in general.

“We’re trying to move the field from do-it-yourself philanthropy to let’s-do-it-together-philanthropy.”

We live today in a society of individual kings, of hyper-empowered people who are hyper-connected, and they can affect change through their own entrepreneurial spirits, dynamism and creativity. We see this in business, we see this in politics and we see this in philanthropy as well. So the last few years saw an explosion of independent philanthropy. The number of foundations in the United States grew enormously — three fold or four fold. The number of donor advice funds multiplied by 10. There is a whole trend that favors individual philanthropy and entrepreneurial philanthropy. If, in the past, you had a few big foundations, let’s say the Rockefellers, the Carnegies, the Fords, now philanthropy is becoming a much wider system.

The democratization of philanthropy is a great thing for society. The issues that come with that are, one, the weakening of traditional communal philanthropy. And we see that in the Jewish community and in the secular community. The growth of independent philanthropy sometimes happens to the detriment of, say, the United Ways or the Jewish Federations, or those venues for collective philanthropy. And that’s something that the system has to work out because we also need collective philanthropy. So that’s the first problem.

The second problem is that with the growth of independent philanthropy, the connections between funders are not always strong enough. So we work a lot in networking and helping funders work together and collaborate. We’re trying to move the field from “do-it-yourself philanthropy” to “let’s-do-it-together” philanthropy.

One last thing is, in the last five years, we saw the growth of a lot of innovative philanthropic vehicles: social impact bonds, impact investing, giving circles, crowd funding. All these show that there’s an intersection between fields, between philanthropy and business, between philanthropy and government, between technology and philanthropy, etcetera. And that’s creating a lot of exciting stuff in the field.

Knowledge@Wharton: You mentioned that the collective groups such as the United Way are giving way to some degree to the individual or entrepreneurial philanthropists, and that there’s less coordination between them and that your group helps to coordinate them. Could you discuss what strategic philanthropy is in connection with those ideas?

Spokoiny: This is a great question because defining strategic philanthropy in the right way really can change the way in which you do philanthropy. And changing the way in which we do philanthropy results in more social good. So strategic philanthropy is really a philanthropy that is focused. We see a lot of philanthropists that try to do everything. And as the saying goes, when you try to do everything you do nothing. Strategic philanthropy entails defining a problem in the society that you want to solve, and then working to try to identify the best way of solving that issue.

It’s not anymore about abstract formulations. We need to go to the next level which is really to define what we want to achieve with our philanthropy. What are the values that guide us? What are the practices that we want to use? What is the theory of change that we want to do? And with the fragmentation, as you call it, of philanthropy — from big central organizations that had, for example, a planning staff that could ask these questions — to more independent philanthropists, those questions have to be asked by every one of us. What are the issues that I want to deal with? What is the change that I want to create? And that defines my strategy. What is my time frame, for example — it is very different that I have a perpetual foundation or I have a spend-down fund that I’m going to spend in five years. All of that informs a strategy, and that strategy has to be conducive to the issues that I want to solve in the community.

“Philanthropy can and should be a laboratory of innovation for the government and for the private sector.”

Knowledge@Wharton: Would you discuss how technology has affected change and innovation in the philanthropic space?

Spokoiny: Technology has also deeply affected the world of philanthropy in several ways. First of all, it’s extremely easy for donors to gather information. That is something that also ended up weakening one of the traditional roles of the central organizations, of the United Ways and Jewish Federations and the like. Much of their role was to actually select and process information on behalf of the donor. Now, donors can do that on their own. They can go on the Internet and find information about each and every grantee.

On the other hand, technology provides a great platform for collaboration at levels that we didn’t know before. One of the things that we are trying to do is for our members to be able to connect through a technological platform and find ways to collaborate. This is something that didn’t exist before. It had to go through a central address that would direct traffic. Now a network can be much more vibrant and much more vital because, through technology, everybody can connect with everybody.

Technology made transparency much more imperative than it used to be. It is important to be able to show all that you do. And last but not least, technology offers a possibility of connecting and reaching a large number of people. If I think about new philanthropic venues like crowd funding — which is you put a project out there and you ask the big public to fund it — this would not have been possible without a platform like the Internet. Yes, in the 19th century you would have a public monument funded by popular subscription, but it wasn’t the same reach and it wasn’t the same flexibility that we have now with these technological platforms.

The danger is [to make sure] that technology does not replace relationships. And that’s very important. And crowd funding does not replace traditional philanthropy. So we need to be extremely careful. Part of being a strategic funder is to know which tool, which philanthropic tool is good or is effective for each specific situation. That’s part of having an intelligent use of technology. Do you need now a crowd funding platform? Do you need some innovative avenue? Or does the situation that you’re dealing with require traditional old school grant making?

Knowledge@Wharton: What role should philanthropy and the government play in accelerating innovation for global social impact, compared with private enterprise’s role?

Spokoiny: That’s a whole field that is changing enormously. In the past you had a very clear distinction between the sectors. You had the first sector, the government, the second sector, the private enterprise, the third sector, the non profit/philanthropic sector. Now one piece of data of the context is that those boundaries have blurred. Now you will have companies that declare to have a social benefit and you would have a philanthropy that uses commercial ways of getting revenue. And you would have a government that would work through philanthropy to do certain things. That’s part of the context that makes your question very critical now, because we need to find ways of interacting across sectors that are novel, and that are adequate to a time in which the definitions are not so sharp.

What we always say is that philanthropy can and should be a laboratory of innovation for the government and for the private sector. Take the issue of research, for example. There are things that government is not going to fund because they can’t use public money to spend on something that has a high risk of failing. For the same reason, probably, private companies won’t fund it. Now this is a niche for philanthropy. Philanthropy should go and say, I can take higher risks because I don’t have the public scrutiny or a public fiduciary responsibility, nor do I have a specific shareholder responsibility, so I can take risks. So philanthropy can be a laboratory for the society. That’s one very important aspect.

The second important aspect is that the government and philanthropy, as opposed to the private sector — and here there needs to be a sharp distinction — need to pick up issues that are market failures. There is a tendency now of trying to make everything into some sort of commercial company. So let’s say we’re dealing with youth problems in some underprivileged neighborhoods. And we’re going to say, “Well, let’s try to work on creating a commercial company. So let’s try to solve this through market mechanisms.” Well, market mechanisms failed in this particular case, so we need to try other things through philanthropy and through government initiatives. This is one area in which government and philanthropy can work together.

“Donors yearn for personal involvement, not just writing checks.”

Knowledge@Wharton: What does your group view as the most effective kinds of philanthropy and social impact efforts? Could you give a couple of examples?

Spokoiny: One very important distinction is that there are not silver bullets. Every situation requires a different type of philanthropic approach. In some cases, you need a traditional grant making approach to solve a problem that is very complex. In other issues you need to involve a lot of stakeholders and bring them together to work on a specific problem.

What I find as a common set of principles in terms of what is effective is the following. First of all, it is effective when philanthropists and funders engage with an issue for the long term. When a funder says that they’re going to make a one-year grant to an issue that is not a one-year issue, they’re actually making a disservice to the field. We encourage people to get engaged with an issue and stay with it until they can see change.

Second, smart philanthropists today recognize that it’s not just about funding their pet projects; it’s about building capacity for the non-profits to operate — the whole debate about funding overhead. Overhead became a dirty word in the philanthropic community, but it’s not. Overhead is what allows a non-profit to operate and do the programs that the funder wants them to do. So what creates a lot of impact is strong non-profits, and strong non-profits need healthy overhead. We’re not talking here about crazy situations where 90% goes to overhead; we’re talking about the capacity that lets them operate.

Third is situations where funders work together to solve issues. One very famous case is how funders got together, foundations got together, with the government in the City of Pittsburgh and really revolutionized the school system there. In our group, we have many cases of people getting together to solve problems … in Israel, for example, in the integration of Arab Israelis or Ethiopian Israelis, etcetera. And they came together and they created very innovative programs that really changed the situation on the ground.

And last but not least, the smart funding that creates the most social impact is funding that works in coordination with other sectors, as we were talking before. Involving the government is important. Involving the for-profit sector, when you can, is important. For example, some of our members have created a project to advance the teaching of science, technology and math in public schools. They actually involve a group of funders, the schools themselves, the government and many companies, many high-tech companies that need to ensure that they have a stream of trained people to fill the jobs they are putting up. So when you manage to work across sectors, your impact grows.

Knowledge@Wharton: Research here at Wharton shows that when organizations want to raise money for a charitable cause or a social impact cause, that emotional appeals often work better than rational appeals. That might not be too surprising, but I’m just wondering how you or your members of your group tend to structure their appeals. I’m sure it varies by project, but in general, if you can generalize, what do you find works best?

Spokoiny: The members of our group are actually the funders. They are the ones being solicited for funds. So it’s very interesting because I can tell you how they prefer to be solicited. What I would say really is that what works is to transform ‘the ask’ into a transformative experience for the donor and the grantee. In other words, this is not really about soliciting; it is about creating partnerships and establishing meaningful relationships. So then the question of emotional versus rational becomes obsolete. It’s beyond that. It’s really about sharing a commitment to a cause and then trying to see how we can work together with that.

Donors don’t want to give just money; they want to get involved. One of the big lessons learned in the last few years is that donors yearn for personal involvement, not just writing checks. People in this highly technological world, they still look for meaning and they still look for purpose. Philanthropy can give them that. You as somebody that requests funds are actually offering something. You’re offering meaning, you’re offering purpose, you’re offering commitment. And you’re offering somebody the possibility of transforming other people’s lives. So that is the platform for a partnership between donor and fund seeker.

Knowledge@Wharton: Could you give a concrete example where that has worked really well?

Spokoiny: One of the things I said is that donors can give much more than money. We, for example, encourage grant seekers, when they talk to funders, to see what the specific skills are that the funder can bring to the table besides money. Is he a lawyer? Can he give you pro bono services? For example, we have on our board a gentleman who’s a professor at Stanford. He knows a lot about technology and using technology for social connections. So we asked him to get involved in developing our networking platform. This is an expertise that would have cost us hundreds of thousands of dollars in the market. Now it’s a win/win. He feels committed to the cause. We all had fun doing it. And we got a great product that we couldn’t have afforded. There are many, many examples like that.

“Giving circles … sit at the crossroads of social interaction, networking and strategic philanthropy.”

The other thing is engage people in a multi-generational way. In other words, we tend to go, for example, to the head of the family to ask for funds. Sometimes we need to work with the entire family. Many organizations are creating programs to work with several generations at the same time. Those work wonderfully. [We] see what each generation can add and can bring to the cause.

The other thing is transform giving into a social activity. It’s not just you’re writing a check in your office; you’re also connecting with people who feel like you, who think like you. It can be also a great social venue for you.

Knowledge@Wharton: What kinds of innovation have you instituted over the last couple of years?

Spokoiny: Several things. First of all, we’re working a lot in the area of giving circles, which is a giving platform that we think is very important. It’s peers getting together and pooling money to do philanthropy together. It’s a great tool, because it sits at the crossroads of social interaction, networking and strategic philanthropy. It is a way of encourage people to be philanthropic and to tell them that they don’t need to be one of the big families, one of the big four just to be philanthropic — that everybody can. You just get together with your friends, your peers, and you can start being philanthropic. That’s one thing.

The second thing is we’re working a lot in the areas of impact investing. Impact investing is when foundations invest their corpus, in other words, a foundation needs to give away 5% of its capital every year. The other 95% is actually invested in the market. Now there’s a whole trend in philanthropy which is to invest this 95% in profit generating endeavors that are linked to the foundation’s mission. So, for example, say you care about the environment. You’re going to invest your corpus in companies that advance your cause. You may sacrifice a little bit of profit, but you’re aligning your portfolio with your philanthropic goals. That’s something that we’re actually working on a lot, and we’re helping funders navigate that.

Because we recognize that collaboration among funders is critical, we’re working a lot in developing a corpus of knowledge and tools about how to collaborate. This is a new field. There weren’t a lot of funders’ collaborations in the past. And so creating a taxonomy of funders’ collaboration, creating tools to help people collaborate, is an important tool for philanthropies that want to be strategic.

The other initiative we’re actually investing very heavily in is the creation of different peer networks. Within our network, we’re trying to create groups that share a specific interest — for example, funders of disabilities, funders of Jewish education, funders of the environment, etcetera. The idea is that in a highly fragmented philanthropic landscape, folks can get together and compare notes, avoid duplication and eventually decide on funding things together.

Knowledge@Wharton: So if someone has a significant amount of money they’re able to put into play in the area of social impact and innovation, someone like Sir Ronald Cohen, for example, what would you recommend?

Spokoiny: So what Sir Ronald Cohen did is very interesting. He created a vehicle — something that’s called a social impact bond. You basically invest in something where you take the risk out of the equation, so then banks and government can fund people who wouldn’t be eligible to be funded in the commercial circuit. Now these people get to do business or to start their own thing. And they get out of the cycle of poverty and need, which is a great strategy.

…. I think there is a lot of philanthropic capacity out there. Americans still give very little, around two percent of disposable income. So if we work right, philanthropy does not need to be a zero sum game. So my advice would be to … define one specific issue that is ambitious, yet achievable, one problem that you want to solve. Sir Ronald Cohen actually doesn’t need my suggestion. He did it already. He went to solve specific issues for which the social capital bonds are actually good tools.

I would suggest every funder do the same: [Find] an issue that is aligned with who you are, with your values, with your family values, with your religious beliefs, with whatever it is — but something that you feel that you can create, that you can bring change to, that you can move the needle on something. That would be my advice, short of suggesting a specific investment. There are big issues in society today. Some are old issues, like public schools. Some are new issues, like the phenomenon of the working poor. It’s up to each person to decide what their values tell them.

Knowledge@Wharton: What haven’t I asked you that would be interesting or important to know about your organization?

Spokoiny: I think that one interesting thing that JFN is actually dealing with is the issue of philanthropy in different parts of the world. We are a global network, and therefore we can see we have members from Europe, from Australia, from Israel. And we see that different people, different countries relate to philanthropy in very, very different ways. As an example, in Israel, which was established as kind of a socialist country, really, I mean very high taxes and a strong collective ethos — the concept of philanthropy was alien. The government takes care of everything. You don’t have to be philanthropic. That cultural clash between that mentality and American mentalities is very interesting.

The issue of how Israel, for example, in the last 20 years became a high tech hub — and as they call it, the start-up nation — is interesting because it actually influences philanthropy. People there see philanthropy in the same model of the start-up culture and the high-tech culture. That’s extremely interesting.

You have the same issue in Europe. Europeans see philanthropy in a very different way. Australians see philanthropy in a very different way. And those interactions are mutually enriching. It’s really heartwarming to see how in Israel, which used to be a recipient of philanthropic dollars, now there’s a culture of philanthropy being created based on an American model, frankly, of foundations and donations, etcetera. We are being influenced by some of these innovative ways of seeing philanthropy that come from other parts of the world. So I think we need more than that. And I think that’s a very rich source of ideas and innovation.

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