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July 19, 2010

It’s great news that Warren Buffett and Bill and Melinda Gates are asking their billionaire peers to give away half their wealth. To the extent that people heed the call, we could see the launch of several more billion-dollar foundations and a flood of new philanthropic dollars in the years ahead.

As a field, we have an opportunity to prepare for this new philanthropic activity and inform how these billionaires exercise their philanthropic impulse. My hope is that we can make visible and compelling the latest thinking about what makes for smart philanthropy. Many grantmakers, both large and small, have important lessons to share about how philanthropy can best contribute to nonprofit results.

I appreciate the opportunity to contribute blog posts this week to the Intrepid Philanthropist, and I want to use these posts to offer a few words of unsolicited advice to the Friends of Buffett and Gates (FOBGs) as they consider dipping their toes into the world of big-time philanthropy. In reality, these are things that all of us in philanthropy should keep in mind as we strive to improve our grantmaking in the months and years ahead.

The first word of advice to the billionaire philanthropists of tomorrow: Focus on building strong organizations rather than supporting only discrete programs or projects. This commitment requires a more comprehensive approach to thinking about capital and includes a preference for larger grants provided in larger quantities over the long term.

Most management consultants agree that the ability to adapt is a core characteristic of innovative organizations. All too often, however, nonprofit leaders do not have the flexibility to act quickly to seize new opportunities or to adjust their plans to changing circumstances in their communities or the wider world. Among the major reasons: restrictions on funding from foundations and government sources, plus a preference among funders for making smaller, short-term grants.

The clearest way to support a nonprofit’s ability to adapt and to set grantees on a path to more financial security is to provide general operating support. Reserve funds can be built only when there is an excess of unrestricted revenue over expenses at the end of the year. And if a billionaire (or any philanthropist) truly believes in the mission and the leadership of a nonprofit organization, then why not trust that organization to invest your money in ways that its leaders believe will get the best results?

Grantmakers, whether large or small, also should consider the merits of providing targeted capacity-building support to organizations for everything from leadership and board development to strategic planning and more—precisely the kinds of effectiveness-boosting activities that nonprofits put off or ignore when faced with restrictions on gifts combined with the urgent challenge of simply staying afloat.
So what do you think? What’s the most important thing for tomorrow’s billionaire philanthropists to be thinking about? I will be offering additional suggestions in blog posts throughout the week, but I’d love to hear the advice you’d give to FOBG.

Kathleen Enright