New twist on charitable giving: trust
Traditional approaches of donating are giving way to a less restrictive method
The following article appeared in the November 27, 2023, edition of The Charlotte Ledger, an email newsletter with smart and original information for Charlotte. Sign up for free:
Gifts without strings create a collaborative, effective relationship between donors and nonprofits, supporters say; a ‘changing culture and conversation around philanthropy’
Trust-based philanthropy enables local nonprofits to innovate and provide highly effective services for community members, such as Care Ring's mobile health clinic that works weekly in neighborhoods across Charlotte. (Photo courtesy of Next Stage)
By Kerry Singe
A new approach to charitable giving is gaining ground.
Call it angel investing for nonprofits.
Philanthropy has traditionally looked like this:
A person or group picks a charity. They dictate a program to support. They write a check.
Later, the organization shows the donor statistics verifying how it accomplished what it said it would do.
“When you give with restrictions, it suggests you know better than the nonprofit,” says Josh Jacobson, CEO of Next Stage, which consults with nonprofits. “We recognize philanthropy is inequitable — people who have the money to give are coming from a place of privilege. When philanthropy comes with this red tape, it’s a continuation of that privilege as a framework.”
The new way?
Trust-based philanthropy.
Donors give money to nonprofits for leaders to use as they see fit, no strings attached.
Charlotte nonprofit leaders say it is more effective and respectful toward those benefiting from the donations.
Leaders say this new approach is needed. The traditional method, they say, can hamstring organizations and hurt the people who need the most help. Trust-based philanthropy has been talked about in nonprofit circles for more than a decade, but the idea has grown more popular in the wake of the pandemic and the summer 2020 protests calling for greater awareness of racial injustice.
Defining success: Community leader Jamall Kinard got a first-hand look years ago at how financial support and success could be misaligned. He worked for a nonprofit that supported students in public schools to empower them to be successful in class and life.
His employer’s funding depended, in part, on hitting specific goals. Yet, Kinard felt the goals missed the mark as the organization was deemed to be successful even though many students ended the academic year frustrated or disillusioned.
“As long as we hit the metrics mandated by the people giving us the money, they were calling that success,” he says. “But it was the wrong way to solve the problem.”
Today, Kinard leads a different nonprofit, which is being funded through the more collaborative, trust-based approach. As executive director of Lakeview Neighborhood Alliance, Kinard works closely with United Way of Greater Charlotte, which gives the alliance money to support operations and works closely with the alliance when selecting vendors to provide services for the neighborhood.
Kinard says he is able to have honest conversations with United Way about what is working well and the challenges his group faces. If there are setbacks, such as when water pipes burst and an office move was delayed, he doesn’t worry about funding being pulled. Leaders from all sides communicate regularly.
“I think United Way has tapped into a great approach,” Kinard says. “People, like the service providers, are accountable to us now. It is inviting people in, instead of calling people out in the conversation, in a more conscious way.”
‘Myth of 15 percent’
Philanthropic giving, or the value of money donated and time volunteered, worldwide has been estimated to be worth more than $2.3 trillion, according to Citi. In Charlotte, a 2019 report by UNC Charlotte’s Urban Institute estimated that households in the 32-county Carolinas Urban-Rural Connection region gave a combined $4.6 billion annually, while grants and donations from foundations, corporations and bequests amounted to an additional $2.15 billion.
The history of philanthropy in the U.S. mirrors generational changes. The Silent Generation, people born between 1925 and 1945, approached philanthropy with a relatively trusting outlook, Jacobson says. Once members of this generation found a cause they liked to support, they tended to stay committed long-term.
The Baby Boomers, however, were much less trusting and saw nonprofits akin to government agencies needing oversight. In the 1970s and 1980s, charities were growing larger and spending more on administrative costs.
That helped lead to what author and nonprofit advocate Dan Pallotta calls “the 15 percent overhead myth” in his 2013 Ted Talk, “The Way We Think About Charity is Dead Wrong.”
People began scrutinizing nonprofit budgets, praising money spent on programming (e.g. bags of rice to support a food bank) and critiquing money used to pay for operational costs, such as employees to do marketing campaigns or repairs to a heater in the nonprofit headquarters.
“That no more than 15% should be spent on overhead has been drilled in everyone’s head,” Jacobson says. “That really keeps an organization from ever growing. If they can’t invest in marketing and human capital, we keep nonprofits small and prevent them from growing to where impact could be greater.”
The Women’s Impact Fund in Charlotte started changing how it gave funding in early 2020 because of the pandemic. It chose to give unrestricted funding and encouraged nonprofits to “do what you need to do to serve folks during this time,” says executive director Patricia Massey Hoke.
The change, for example, allowed a group that works with immigrants that had received money for health services to pivot and serve hot meals to hungry families.
The Fund has continued to give unrestricted grants, which also has meant changing its oversight from reviewing metrics tied to a specific goal to having a relationship-based approach. That means talking with nonprofits about how things are going and asking how the Fund can support them in other ways, such as by having members volunteer or leverage their networks.
“There is a changing culture and conversation around philanthropy,” Hoke says. “We are all benefiting from that.”
Part of April Whitlock’s mission at LendingTree is to help emerging nonprofits act like businesses. Whitlock serves as head of corporate citizenship and is executive director of The LendingTree Foundation. She also oversees the LendaHand Alliance Cohort, a multi-year investment that gives 10 non-profits $125,000 a year for three years.
Whitlock describes the approach as relational philanthropy, which includes providing unrestricted funding and sharing social capital and her organization’s assets. She says the 10 nonprofits chosen for the cohort had great ideas but needed a safety net.
“They needed an angel-funder,” Whitlock says. “They needed someone to say, ‘You are amazing, your idea is amazing, and you need support to take it to scale.’”
LendingTree does not dictate how the nonprofits spend the money, but Whitlock supports the nonprofits by meeting with them quarterly and providing help with items such as consulting services, board member training, fundraising and marketing.
Whitlock says nonprofits have succeeded in ways such as increasing revenues from $300,000 annually to more than $1 million and hiring staff. She is also working to raise awareness among donors of the need to fund all aspects of a nonprofit.
“Why do we treat for-profit businesses very differently than we treat nonprofits?” Whitlock says. “I’ve been at dinner with folks who say ‘I would never give money that goes to pay for salaries.’ But why? Someone has to do the work.”
Shifting power structures
In the Lakeview community in west Charlotte, residents are getting more say in how services are being provided for them. That’s a big change in how things have historically been done, particularly for poorer people of color, Kinard says.
“Philanthropy is built on whatever foundations, corporations or whomever decide they want to give. They have mandated what the problem is and what the solution is, and it is very problematic. It’s not built on relationships. It’s not built on hearing what people have to say,” Kinard says. “We’ve allowed that type of philanthropy to reign throughout America and across the world, and I think it’s more of an ego stroke than about solving societal problems.”
Instead, Kinard says, trust-based philanthropy works when power is redistributed from being held solely by those with the money. In his neighborhood, residents now weigh in on the quality of services paid for by United Way and provided by a third party.
One service provider, for example, had promised to be available three days a week, but residents did not find the provider accessible. Kinard says United Way has listened to residents, and some vendors have been replaced while others made changes based on the feedback.
“United Way has found a way to shift the power relationship,” he says.
Jacobson says accountability will always be important, and donors should ask questions about how money is being spent. But return on investment may be demonstrated differently than it has in the past. Instead of metrics, a nonprofit may provide a site tour. Regular and honest communication is a must. Donors may need to take a longer-term outlook. Ultimately, Jacobson says, it comes down to the relationship that is built.
“We should be trusting nonprofits more. Nonprofits are overseen by professional staff, and people are sacrificing to do this work,” he says. “I’m not going to ask to see the kitchen and check the grill of my favorite restaurant to know it’s clean back there. With a nonprofit, as long as the value proposition is clear, why would I care how dollars are spent?”
Kerry Hall Singe is an award-winning former Charlotte Observer business reporter. In addition to writing for various publications, she helps her clients tell their stories and manage content across multiple media platforms.
The Charlotte Ledger is the media partner of The UnFundable Project, an initiative by nonprofit consultant Next Stage that seeks to raise awareness about trust-based philanthropy through a grant-making initiative. The Ledger is a media partner because we believe local nonprofits play a vital role in improving the quality of life in the Charlotte region. Find out more about The UnFundable Project, including a February celebration, here.
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