Reinventing the Role of Charitable Giving in a World of Accelerating Change

If Pallotta's recommendations are taken seriously by philanthropy's leaders, they'd be important steps improving the sector's impact.
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Click here to read an original op-ed from the TED speaker who inspired this post and watch the TEDTalk below.

Describing the unintended results of charitable giving rules and practices, as Dan Pallotta does so well in his TEDTalk, is courageous. After all, who'd risk support by biting the hand that feeds them? Thousands of organizations serving billions of people depend on charitable contributions. Some are religious organizations, others are established by citizens who decide to take action and become changemakers. If Pallotta's recommendations are taken seriously by philanthropy's leaders, they'd be important steps improving the sector's impact.

The longer-term, bigger payoff, however, lies in one of Palotta points: Philanthropy's moral foundations -- and the resulting legal rules and policy practices built in the 1700s influenced by Puritan values -- remain largely unchanged today. This echoes a similar narrative of visionary business leaders: The Industrial Revolution in the late1800s built its business model on ancient norms about power (concentrated in the hands of a few), rules (made by those in power), hierarchy (top controls, enforces, bottom follows and serves), decision-making (by a select group) and loyalty (by those who serve) to follow established patterns (inertia reinforcing the status quo). Not much has changed as we look across workplaces today.

These beliefs are so engrained in our psyches that we take them as givens. Measures of impact, ROI, leveraging capital, fast turnaround times, intellectual private property rights, prototyping, and replication -- were grafted onto many sectors, including philanthropy.

But today everywhere -- in business, politics, governance, order and vast unmet global needs -- the rules of the past are no longer working. Those who cling to them face frustration in achieving their goals, or fail and disappear.

What is Replacing the Old Patterns?

Philanthropy grew because of the inability of the public sector -- government -- to provide for the welfare of all its citizens. Into this void stepped charity, and the "nonprofits" they funded to work for "the public good." The last three decades have seen an explosion of thousands of citizen sector organizations globally. Their growth was directly linked to the generosity of individuals donating money, time and resources and, more recently, CSR and corporate foundations using a philanthropic model to supporting good works in communities as part of corporate social responsibility.

At the same time, a new professional sector arose -- thousands of social entrepreneurs -- whose values and sustained work use their empathy, business skills, community knowledge, passion, leadership style and team building across sectors for innovations and change by and for the good of all.

Their work has transformed the way we address issues ranging from human rights, health, nutrition, energy, job creation and access to technology and market solutions. Social entrepreneurs are the engine behind a major transformation in the way we care for others. It is no longer only about relieving suffering today, but building new approaches and systems that remove the causes of suffering for the long run, and finding partners to harness the tremendous capacity of market forces and individual changemakers everywhere to innovate and grow to scale better systems that suit our globally interdependent world.

David Green is one of my favorite social entrepreneurs. His work is about advancing "compassionate capitalism." Before David focused on reducing the cost of the intraocular lenses needed for cataract operations, only 200,000 low-income people were operated over a period of 8 years in India. The number was limited by the amount of charitable giving available. After reducing the cost of the lenses to just 20% of original cost and significantly improving the efficiency of cataract operations, today over 2.2 million receive this cure annually in India. Pioneered by Aravind Eye Hospital, these changes are used around the world, transforming the way we deliver eye care.

Working in a World Beyond Four Walls

None of David's innovations would have been possible without grants that financed the R&D, pilot demonstrations and capacity building required. Should we call these resources "charitable giving," when their goal is to harness private market forces? Maybe.

We see it as a new role philanthropy can embrace that multiplies its impact exponentially: an integrated approach to problems and opportunities that are too big for any one actor to solve alone. One in which philanthropy is part of the team that includes private companies, banks and investors, governments, universities, citizen sector organizations and social entrepreneurs. It is an approach in which we co-create the systems we need to support and sustain a better future, one that unleashes the talent and resources of all stakeholders, united in a single purpose - solutions for the good of all. A world where we are sure the walls we've created to "protect" us and define us in the past are now limiting our ability to find new allies, spark new ideas, find useful resources, especially the human capacity to innovate. Those walls must come down, replaced by changemakers for whom old titles or descriptors are less relevant than their ability to trust, collaborate and innovate as teams as fast as the world is changing.

At Ashoka, we've created and tested new social-business frameworks - especially the hybrid value chain -- to structure unprecedented collaboration across sectors, co-creating with diverse stakeholders. To leverage impact, these now are evolving into integrated Hybrid Value Systems -- intentional communities of practice sharing the same vision and values -- working for the good of all.

What Does This Mean for Charitable Giving?

Like pioneer business and social entrepreneur leaders, philanthropy needs to reinvent itself to be effective. First, it has to recognize its best strategy for change at scale and leveraged, sustained impact is to become an important stakeholder and team co-creator of integrated hybrid value systems.

Philanthropy can then identify what segment of each big problem or opportunity will never be appropriate for private market forces, nor covered adequately by government. This much smaller segment makes developing the priorities, tactics and partnerships clearer for those who want to continue direct service charitable giving.

Beyond this, philanthropy is essential to generate support at key stages of collaboration, innovation and new solutions. Support to seed capacity-building so previously siloed stakeholders can work together is critical. Philanthropy plays an important role as mentor, connector to smart networks, and accelerator of innovation and spread. Its thought leaders influence the global conversation directly, based on their front-row seat funding research, seeing trends and seeding grants for change.

Getting from prototype to scale needs thoughtful, patient capital is necessary to build new systems at global levels. As co-creators within budding Hybrid Value Systems, charitable giving can help crack the ceiling of change at scale, supporting the development of skills and leaders needed for collaboration to become the new competitive edge for innovation and positive change created by and for the good of all.

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