Next-gen donors, armed with more resources than ever before, are determined to revolutionise giving and achieve progress on some of the world’s most intractable issues. Dr Michael Moody, co-author of ‘Generation Impact’ says the biggest consequence of the ‘Impact Revolution’ is that non-profits must adapt the way they engage big donors.
Nicole Richards, April 2018
“You cannot underestimate how important impact is to this generation of donors,” Dr Michael Moody says categorically.
Moody, who is Frey Foundation Chair in Family Philanthropy at Grand Valley State University in the US, is referring to the growing number of Gen X and Millennial philanthropists, some of whom are set to benefit from the largest intergenerational wealth transfer in history, and others who have built vast personal fortunes of their own.
Regardless of the source of their wealth, next-gen donors share a common intention: to generate more impact from their philanthropy.
In ‘Generation Impact: How Next Gen Donors Are Revolutionising Giving’ Moody and his co-author, Sharna Goldseker, predict that “if current trends in wealth and giving continue, these rising major donors will be the most significant philanthropists ever.”
Dr Michael Moody shared insights gleaned from his research into the giving preferences and ambitions of next-generation donors with Philanthropy Australia’s Nicole Richards.
NR: The next-generation’s search for a ‘philanthropic identity’ is a key topic you explore in the book. Is it possible to outline the key features of that identity?
MM: I think the primary issue is that they are forming their identity right now. I guess I’d separate it between the next generation’s philanthropic identity as a collective shared set of practices, strategies, interests, ways of learning and giving and their individual personal philanthropic identities.
At an individual level, particularly for second generation donors, there’s the challenge of being excited about changing things to have more impact and innovating for the future while respecting the past and being careful stewards of the family legacy. That’s the tension they face.
For those who are first-generation donors, who don’t come from a philanthropic legacy of a giving family, they too want to learn from the past but they’re pursuing their identity without some of this tension about respecting the past.
Both first-generation and second-generation donors are dealing with the same identity question: What kind of donors are they going to be as the biggest donors in history?
In terms of the collective philanthropic identity of the next generation, that collective identity is one that’s obsessed with impact, is eager to finally move the needle on some longstanding causes – they’re not choosing new causes, they just want to finally create impact on the longstanding problems – and is excited about pushing the envelope on experimentation and innovation and risk. They also want to be very deeply involved in organisations - they want to be hands on, they want to develop close relationships, they want to focus on fewer organisations and go deep with those organisations and that’s fundamentally changing the relationship between non-profits and their funders.
Impact is said to be a key focus for next-gen philanthropists. Clearly, it’s early days, but do you get the sense that they’re serious about evaluating their impact or is it rhetoric?
In the book, for the most part, we’re asking them what they want to do as donors. So, as an academic would say, it’s more attitudes than behaviour.
But, many of these people are out there giving now, so we do have evidence that they’re acting in this way. We do know that some of them at least are backing up the rhetoric if you will of wanting to make an impact and wanting to give to those organisations that show results in a way that they can see and focusing on those that they believe are most effective.
Still, there are a lot of people who talk about impact but have only a vague notion of what they mean by impact. This is the challenge of our field in some ways.
The most common way of thinking about impact is that impact is something you can see. The difference that you can see you’ve made.
For some next-gen donors, ‘seeing the impact’ can be seeing the face of the beneficiary, the child that was helped by the program when they go on a site visit. For others, it’s a spreadsheet of results where they can review their philanthropic investment against a set of benchmarks.
The point is, they’re really concerned with seeing the impact. There are some challenges of course of being so obsessed with impact because some organisations and causes can show their impact a lot more effectively than others especially when it can a long time to show impact. And some are never going to really show the impact in the same way that others are.
The worry is that the next-gen might not stick around to see the more difficult long-term impact of certain causes realised and might shy away from those causes like mental health.
Which other cause areas seem to be the winners and losers in terms of next-gen preferences?
This may actually be different in Australia versus the US because of how philanthropy invests in causes - I was surprised to see just how high up the list arts and culture was in terms of what philanthropy gives to here because it’s pretty far down the list in the US. And it’s not because people give less to arts and culture, it’s because we’re so focused on philanthropy giving to education and healthcare and social services because our government doesn’t.
In the US, we found that the causes aren’t dramatically different from previous generations. The top two causes were the same as their parents/grandparents: education and basic needs.
The big ones that are different are religion and faith-based causes and that’s due to the decline in religiosity so that one wasn’t a surprise.
They do want to give more than previous generations to the environment on account of climate change but it’s not a huge difference.
It seems that the causes are not necessarily going to be different – they’re still concerned about the same issues - but they want to give to different organisations within those causes.
That goes back to impact. They don’t want to give to the big museum and they certainly don’t want to give to the big campaign where they’re giving a $1 million contribution along with many others for the big hospital or the big university.
Instead, they want to give to smaller organisations which means those areas like arts and culture or health where the campaigns tend to be big campaigns for traditional institutions, they’re just not interested. Not because they don’t care about arts or health but because they want to see the impact of their giving and they can do that more easily in smaller organisations. It’s the type of organisations within the causes that are going to change more than the causes themselves.
Where does that leave impact investing and social enterprise?
Next-gen donors are much more comfortable with a portfolio of approaches. Take the Chan Zuckerberg Initiative or Justin Rockefeller whom we profile in the book. The idea that they as big donors will have only one tool like grantmaking to solve the problem is uninteresting to them and they believe it will probably be less impactful too.
Why not expand your tool belt? Why keep this arbitrary barrier between non-profit solutions and for-profit solutions or even governmental solutions?
They are sector agnostic – they don’t believe that good only happens in the non-profit sector, so why would they restrict themselves to trying to do good just through the non-profit sector? They’ve also grown up in a world of pink M&Ms for breast cancer research and TOMs shoes and fair-trade coffee.
There’s a great chapter in the book about ‘inspirational peer pressure’. Can you give a bit of a snapshot?
This is the Facebook generation, the Instagram generation, so they are very oriented toward learning from their peers and giving with their peers. The appeal of being peer-based is really powerful for them.
It’s not as though previous generations didn’t give through their peers, it’s that this generation wants to be much more engaged in a deep way with their peers. It’s not just the quid pro quo of ‘I’m on the board of the symphony, you’re on the board of the Red Cross, I’ll write a cheque to your gala event, you write a cheque to my gala event – that was peer-based fundraising.
Now it’s ‘We’re going to join a giving circle together or I’m really into supporting this school, I really believe in it, I’m going to create a peer network that’s going to work on a school together and we’re going to give our time and our talent as well as our treasure.’
They also really look to their peers for advice about organisations that are great because part of having a deep engagement with an organisation is then sharing that authentic, candid experience with your peers in a way that brings them in. It’s not just Time, Talent and Treasure – we add a fourth T to that: Ties. Their ties are to people who have their own time, talent, treasure. They know that if you want to have impact, you want to give all four Ts.
Do next-gen donors tend to have any kind of working knowledge of the non-profit sector? Given their preference for high engagement, do they understand the resourcing limitations non-profits face?
Some do and some don’t. This is the biggest consequence of what we call the Impact Revolution – that the charities and nonprofits are going to have to change the way they engage big donors. It forces adaptation.
Some of the donors come in without much knowledge of the non-profit sector and that can be a big problem. They come in with a lot of money and a lot of big ideas and they can be like a bull in a china shop in some ways.
Some come in with their own personal experience and some go on a donor journey. In fact, I think that donor journey becomes even more important for those who come in and want to engage but come in so eager and excited that they sort of bowl over the organisations they want to have that relationship with. We’ve talked to some of them who’ve gone through the process, and over time they realise that the best way to have that relationship and find the right fit is to be respectful of the power differential.
For most of them, it’s something they’ve got to learn so it’s going to be messy. It’s a revolution and there’s fundamental transformation and there’s going to be some messiness going on.
The way we put it, tongue in cheek, is that the next generation of big donors are going to be much more high maintenance than previous big donors. They’re going to want to sit down with the staff, they’re going to want you to be transparent as a charity with your problems, they want you to open up the books, they want you to be willing to take risks. All that requires a different way of treating and engaging with your big donors.
Was there anything that surprised you in your research?
The earnestness of these young donors was pretty surprising. Just how proactive they’re being in trying to find the experiences that will make them better donors.
They take their role as big donors of the future seriously – so that’s good news.
'Generation Impact: How Next Gen Donors Are Revolutionising Giving' is available now.