It goes without saying that nonprofit organizations need money to operate. While many organizations still take pride in minimizing their overhead – some even boast about being “all volunteer run” – the highest impact organizations know that running on a shoestring budget can turn down the volume on their efforts.

It’s essential to pay high-caliber professionals competitive wages, and serious investments in growth are required to ensure their stability and drive measurable impact for as many people as possible.

Because of this need for significant financial backing, grant funding and major gifts play important roles in any organization’s long-term growth strategy. What’s often lost in that conversation, though, is that major gifts and grant funding often come at a significant cost to the organization. 

Sometimes, these funding opportunities are actually more trouble than they’re worth, or worse yet, can be detrimental to the organization’s mission.

Giving ≠ Generosity

It’s no secret that philanthropy can be self-serving on various levels. From lucrative tax deductions to public recognition and legacy-building, there are a wide variety of self-serving reasons why philanthropists benefit from their giving. And while some philanthropy is certainly altruistic, much of it isn’t. 

If you don’t believe us, check out the recent news coverage on Elon Musk’s brazenly self-dealing philanthropy and how Warren Buffett’s giving often keeps funds within the Buffet family. Even the Benioff family, which makes substantial donations to environmental, education, and healthcare-related nonprofits, frequently attaches naming rights to their contributions and selects causes that directly benefit their own reputation and that of Salesforce (the company he founded in 1999 and still leads today). 

It’s no longer reasonable to assume that large donations are made for purely altruistic reasons – especially when those gifts go to other grantmaking organizations and organizations without demonstrable impact, or come with the promise of fanfare and other reputational benefits.

Increased Donations ≠ Increased Capacity

Of all the ways the ideas in this article may seem counterintuitive, this is perhaps the biggest. The fact is that more money does inherently mean more resources and more capacity to get sh*t done. However, with philanthropy and grantmaking, this isn’t always the case. 

Major donations may come with strings attached, such as various forms of public recognition or networking, and may require development directors to go to great (and quite expensive) lengths to secure the donations. Funders can also withdraw their funding and not fulfill pledged donations that organizations are banking on. Ultimately, any or all of these factors may significantly reduce the net value of those gifts. 

Grants can have some onerous requirements, too. The application process is often quite long and labor-intensive, and organizations that pursue them may only win a small percentage of the grants they apply for. 

In the case of reimbursement grants, organizations don’t receive funding until the money for grant-related assistance has already been spent. This buy-now, gift-later process makes implementing a reimbursement grant challenging from an accounting perspective and completely untenable for small organizations for which many such grant programs are designed.

Additionally, many grants and large donations may attach unique reporting requirements that deviate from the beneficiary organization’s typical (and often appropriate) evaluation metrics. 

Long story short, large-scale philanthropy can sometimes create challenges that outweigh the benefits of the dollars it brings. 

As The Heat Initiative’s Sarah Gardner put it in a recent episode of Cause and Purpose, “[Understanding] the money you don't want is actually just as important as the money that you do want, cause then you don't spend time cultivating it when you actually don't want it.”

Philanthropy ≠ Impact

Emotion drives the vast majority of donations to nonprofit organizations today, and in addition to the reasons outlined above, philanthropy remains very risk-averse. 

That means funders often sacrifice impact in favor of funding larger, more established, “safer” organizations with less innovative ideas and fuller coffers. No program officer ever got fired for sending money to United Way, for example, even though smaller, lesser-known programs are making incredible progress in workforce development, where funding would unlock near-limitless potential.

Funding often misses the mark regarding impact because creating, measuring, and evaluating impact is challenging. It requires domain-specific expertise, thorough research, and careful analysis to do it well. Most funders just don’t have the in-house resources or expertise to do it well, let alone ensure their funding decisions aren’t leading to unintended negative outcomes for clients. 

Now, we’re certainly not recommending that philanthropists stop giving. We’re just saying that the act of giving doesn’t necessarily lead to measurable positive outcomes, and modern philanthropy needs to stop pretending that it does.

How Altruous is Changing Philanthropy

A significant reason philanthropic giving doesn’t make an impact is that there just hasn’t been a great way for funders to discover and learn about high-impact programs that align with their missions – not to mention the fact that it’s almost impossible to put funding to good use immediately. Until now.

At Altruous, we’re reinventing what philanthropy can be through what we call High Integrity Philanthropy, and we’re driving unprecedented efficiencies through our groundbreaking platform, currently in closed Alpha. 

The fact that you’re reading this means that you’re an important member of our community. We’d love to learn who you are and how you’re driving impact, and we’re happy to share more about what we’re building here at Altruous. Contact us today, and let’s start the conversation.

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