Why the Philanthropic Dollar is Special

Recently I had the privilege of talking with the leaders of a brand new foundation about why a philanthropic dollar is a special dollar and therefore shouldn't be treated as just another dollar in the funding pot.

A philanthropic dollar is special because of the freedom associated with that dollar.Unlike other funders in the civic arena -- such as public and private funders -- philanthropic funders have an incredible amount of freedom to choose where they allocate their dollars. There are a myriad of restrictions on where public dollars can flow. Ask anyone in the public system what they'd change first, and more often than not the answer will be something like: "more flexible funding." Private sector dollars allocated for civic/nonprofit efforts also are tightly controlled. Most companies prefer funding efforts that return some value to the bottom line.

But foundations -- and individual philanthropists -- can fund just about anything they want as long as it fits within a mission (that can sometimes be rewritten) and fulfills a charitable purpose. Of course some foundations place more restrictions on their dollars than others, but generally these are self-imposed restrictions. Even foundations that are focused on staying true to their founders' original intent find themselves with much more flexibility than the average public official.

The new foundation I was speaking with is focused on access to health services -- a pretty wide open space that allows the leaders to freely choose where and how they want to put their money.

I encouraged them to use their philanthropic dollars in one of two ways. The first is to fund high-performing organizations and/or their programs. High-performing organizations produce valued outcomes for their communities and are deserving of our support. (Finding and sustaining high-performing organizations isn't so easy; but Mario Morino has written the book on that subject.)

The second way to use a philanthropic dollar is to try and align the other dollars in the funding pot. While it is an exaggeration to say there is plenty of money to address all of the world's problems, we all know that many of the public, private and philanthropic dollars being put into the pot go to waste because they:

• go to organizations and programs that are far from high-performing.
• fund programs that are isolated and often at cross-purposes from each other.

Philanthropy has the freedom to use its dollars to help other funders (their philanthropic peers, as well as public and private sector players) learn more about the outcomes that are being generated by their respective grants. Philanthropy can use its dollars to help convene stakeholders to reach a shared understanding of what could happen if their efforts were better aligned. And they can use their dollars to help stakeholders align their efforts (using the Collective Impact framework or another approach) to achieve greater change than they ever could in isolation.

This freedom is what makes a philanthropic dollar so special. No other player in the civic arena has this freedom. No foundation -- whether brand new or decades old -- should waste such freedom.

10 Lessons from 10 Years in Regional Physics

I shifted from trying to change the world through journalism to changing the world through civic engagement about 10 years ago. My focus has primarily been on issues related to economic competitiveness. (Read this post for why I hate the term "economic development.")

I'm still learning, but here are 10 lessons learned so far.

• Economies are regional, but many of the systems that shape a region's economy are local. Dealing with the regional while ignoring the local is a recipe for frustration.
• Regional economies are product portfolios. The vibrancy of the regional economy reflects the quality of and demand for a region's products (goods and services). 
• Regionalism means strengthening community assets and connecting them to the regional economy; it does not me consolidating local government (that's called consolidating local government) nor does it mean bigger places telling smaller places what to do.
• Economic growth without increased opportunity is insufficient and unsustainable. But only if we truly care for those who are less fortunate.
• Economic interventions should either be focused on improving a region's product portfolio and/or improving the performance of multiple complex systems – including the education, entrepreneurship, innovation, business development and workforce systems – that contribute to a region's competitiveness.
• The outcomes of those systems are beyond the control of any single entity or program and reflect how well the individual organizations within them perform and the quality of their interactions with each other.
• The quality of an organization’s performance reflects the clarity of its goals and the level of accountability to which it is held for achieving those goals. High performing organizations are rare. Organizations being held accountable for outcomes are rarer.
• The quality of the interactions among organizations within a complex system can be improved by creating the capacity for collaboration, including the capacity to build trust, develop a common agenda, align actions, and measure and communicate progress.
• Philanthropy has a vital role to play in supporting high-performing organizations and effective collaborations within these systems. 
• Supporting a growing, opportunity-rich economy is work that never ends.

And number 11, the most important lesson of all: Sustained positive change only occurs when leaders within a community refuse to tolerate the inequity they see within the communities that they care about.