Four key practices for a more effective philanthropic sector

By Larry Kramer, President, The William and Flora Hewlett Foundation

The past two years have changed the terrain on which philanthropy works, not least by bringing overdue recognition to persistent racial, gender, and wealth disparities. This, in turn, has served as a call to action for philanthropy and international development institutions to examine how our own practices have contributed to creating or perpetuating inequity. More importantly, it is a call to do something about it.

We have, at the same time, seen a massive infusion of new capital into philanthropy, a by-product of huge fortunes that have been made in recent years. These new resources offer an opportunity for philanthropy to change as well as grow. We need to create a new “normal”, one that does a better job at advancing the goals and aspirations we talk about but seldom achieve.

That’s no small task. The newly released OECD report Private Philanthropy for Development: Data for Action reveals how foundations have broadened their ambitions, aiming to go beyond palliative solutions by strategically using their funding to dismantle some of the root barriers to economic and social development. But it also identifies how risk aversion, a lack of transparency and insufficient internal capacity still limit foundations’ potential to amplify their contribution to development.

Yet there are some relatively straightforward practices philanthropy can adopt to better unlock its potential in the new world that’s emerging.  

1. Be open and transparent

The first necessary change is not new, in the sense that it has long been acknowledged as important even while being too little realised in practice. Being open and transparent allows public scrutiny, which is critical for learning and for building credibility and trust with grantees, the communities we serve, and society more generally.

Most countries impose only minimal transparency requirements on philanthropic organisations, but nothing stops us from holding ourselves to higher standards. It’s time for all of us to adopt a practice of open philanthropy, with greater transparency and inclusiveness, not only about data on spending but also on strategy development, decision making, evaluation results and mistakes. This would be a remarkable step toward enhanced joint learning and effectiveness.

2. Be catalytic

Second, philanthropic funders must look for opportunities to be catalytic. This is another idea that is familiar in theory yet all too rare in practice. The contribution private philanthropic funders can make to development will never come from the amount of funding we provide. It must come from how and where we provide support. Because we are not accountable to voters or markets in the ways that elected leaders and businesses are, we can help test and try new things and experiment with new approaches. We can move fast and be nimble, flexible, and adaptive. And we can convene, bringing together actors that might not otherwise speak to each other or work together. This freedom, often presented as the biggest challenge to the legitimacy of philanthropy, can in fact be the source of its greatest strength.

In these ways, philanthropy can lay groundwork and establish the conditions for catalytic action by business or government, which can then bring their larger resources to bear on an issue or problem. COP26 in Glasgow provided a clear demonstration of this potential. By using our grant resources and “beyond the grant dollars” assistance, we helped pave the way for asset owners controlling USD 140 trillion (40% of global wealth) to begin taking action that absolutely will make a difference. Likewise, a group of more than twenty funders were able to catalyse more than 110 governments to pledge to reduce methane emissions by putting together a pooled fund of USD 330 million to provide the technical and other support these countries needed to commit.

3. Be collaborative

No individual funder, even the biggest one, can accomplish anything really worth accomplishing on its own. Although collaborative work among funders has become more common in the past decade, it remains exceptional, difficult to construct and limited. Only a third of the foundations in the OECD report on Private Philanthropy for Development – 67 of 103 who replied to the organisational survey – had been part of a private donor collaborative, and more than 50% still find it challenging to identify partners with aligned interests. As often as not, “collaboration” is confined to sharing information and sporadic joint funding. Real collaboration, in which there is genuine co-operation, sharing of goals and recognition, willingness to alter processes and reporting requirements for the benefit of grantees, pooled funding, and the like, remains rare.

Even rarer is the idea of “diffuse reciprocity”, in which potential partners support each other without necessarily requiring specific returns of equal value for themselves, simply to build collaborative muscle, recognising that if everyone does this, everyone benefits over time.

4. Trust your grantees

Lastly, and critically, philanthropy can achieve these outcomes more quickly and effectively by trusting the organisations it supports and the people it seeks to help.Flexible funding and multi-year grants enhance the efficiency, impact, and resilience of grantees, while showing trust and providing an authentic way of sharing decision-making power and building equitable partnerships.

The pandemic and the racial and social reckonings of the past two years accelerated some positive trends, changes we should all work hard to make stick. In the immediate wake of the COVID-19 shutdown, hundreds of US-based and European funders pledged to loosen restrictions on their grants: converting project grants to unrestricted support, relaxing burdensome and unnecessary reporting requirements, and making new grants as unrestricted as possible. Many more took these steps without signing a formal pledge. The hope now is that funders continue these practices.

And very importantly… decolonise philanthropy

While spreading practices like these is important, philanthropy has bigger challenges before it too. Namely, the need to improve its practices regarding diversity, equity, and inclusion, both in our internal operations and structures and our external grant making. In our international work, fundamentally this means changing our mind-set from one in which donors in the Global North guide and support governments and people in the Global South to develop, to a mind-set in which our support is aimed at facilitating the efforts of governments and people in the Global South to chart their own development priorities and paths. In practice, this means, among other things, shifting decision-making to actors in the Global South and providing resources to people, organisations, and institutions in the countries in which we work, based on the recognition that they know best.

All these actions require acting with humility and recognising our limits, while building relationships rooted in partnership and partnerships rooted in trust. By doing so, we can better deliver on our collective ambition and meet this critical moment. We can contribute to build an international system more capable of addressing our most pressing challenges — from global health problems to climate change — in ways that are fairer and more equitable. We can build a better future for all.

This blog is adapted from remarks delivered at the launch of the Private Philanthropy for Development: Data for Action report in December 2021, and published on the occasion of 10th anniversary of the Network of Foundations Working for Development (netFWD).