NEW YORK (Reuters) - Charities are learning to mimic for-profit companies as a way to woo wealthy donors who see philanthropy as more than just a tax break and demand social returns on their investments, experts say.
Just speaking the language of Wall Street can make all the difference, said Cheryl Dorsey, president of non-profit Echoing Green, which awards start-up capital to social entrepreneurs.
“I marvel at what these Wall Street guys are giving us money to do,” Dorsey told a panel discussion at the National Conference on Volunteering and Service. “If we framed it in traditional social justice terms, they would run from us.”
But using traditional business terms to frame the goals, describe the impact of a nonprofit group and convince donors to fund their cause “really works,” Dorsey said.
With a push toward so-called “giving while living” — led by Bill Gates and Warren Buffett, who are asking fellow U.S. billionaires to give away at least half of their wealth — rich donors are asking tough questions of charities before giving to ensure their investment will provide a social return.
Individual Americans gave more than $227 billion to charity in 2009, according to a the Giving USA report by the Center on Philanthropy at Indiana University, while another $24 billion was bequeathed.
Philanthropists need to assess where to put their money, in a similar way to a private sector venture capitalist, said Jerry Hauser, chief executive The Management Center, which provides management advice to non-profit groups.
“Just asking the questions for the funders can be very powerful,” he said. “It will ultimately help money flow to the right places.
“When organizations are forced to get clear on and articulate what they’re trying to accomplish, to track their progress against it, to reflect on that and to reassess and restrategize, it does make them much more effective,” he said.
Philanthropists are paying closer attention and imposing higher standards on the traditionally sheltered charity sector, said Tom Tierney, chairman and co-founder of the Bridgespan Group, which advises philanthropists and non-profits.
“What we see as a trend is more engaged philanthropists that are setting the bar higher and higher for themselves and the organizations they support,” Tierney told Reuters.
Such donor interest pushes groups to operate more effectively, expand their impact and come up with ways of measuring their success.
“There are no market forces, there are no competitors to take market share away, there are no customers that are going to shop someplace else. The absences of competitors and customers create this kind of protected zone for philanthropy,” Tierney said.
But while more wealthy Americans are treating philanthropy as an investment, some experts warn that the non-profit sector is not as easy to measure and judge as the private sector.
“In business ... you have these very specific simple metrics and you can boil down very complex industries into, ‘Did it make money or not?’” said Susan Wolf Ditkoff of Bridgespan. Among non-profits, “it’s harder to keep score and harder to make a difference in the first place.”
Editing by Ellen Wulfhorst and Bill Trott