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.