Effective and meaningful philanthropy takes many shapes and forms: one-time gifts, single year, multiyear. Gifts from foundations, donor advised funds, trusts or personal checkbooks. Gifts with a narrow focus or those with broad intent. Do not underestimate, in any case, the amount of planning necessary to structure a gift that advances your goals as a donor and addresses a grantee’s needs and capacity.
Making a strategic gift in any form can be both exciting and daunting. It can allow a grantee organization to successfully pursue a new initiative or enhance existing programs and services that add value for all stakeholders. It also is a business decision that requires careful thought and mutual understanding of objectives and timelines—all which should be documented and shared with those involved in your philanthropy.
Whether making gifts large or small, how can you assess organizations’ needs to ensure you are providing the gifts that most meets those needs? How can you be sure to right-size your gifts? How can you ensure that your gifts stay aligned with your mission and goals, and how can you maximize their impact?
Here are some pitfalls to avoid and some prudent practices to follow when making strategic gifts of all sizes.
Starting out right. We work regularly with individuals and families to help them ensure that the gift they make is a win-win for both the donor and recipient organization. The starting point is always to help donors clearly articulate their intent, and to help them understand what the process should be to ensure a successful gift and partnership with the recipient organization or institution.
We prompt donors to consider whether they prefer to give during their lifetimes and/or as a part of their estate plan after death. We ask them where funds will come from—foundation or trust, donor advised fund, personal checkbook or some combination thereof. We also ask how the gift fits into their overall philanthropic strategy.
Do not underestimate the planning necessary to structure a gift that advances your goals and addresses a grantee’s needs and capacity.
Recently, we worked with a client to facilitate a very significant (US$50 million) multiyear gift to his alma mater, with the goal of making the university’s business school one of the best in the country. The terms and conditions of the gift had to be carefully considered and discussed with the institution to determine if the goal was even possible. Was it a realistic one? How might the university achieve the goal? How long would it take to accomplish?
This kind of dialogue between the donor and the recipient is important to the success of the gift—for all stakeholders and no matter the gift’s size. It protects both parties and is often the most valuable aspect of expressing your charitable intent.
Assessing the organization’s needs. Have you determined whether the gift is one that would add value to the institution or organization you have selected? Having a conversation with the organization about what it would like to see funded and why—or sharing with them what you are considering investing in and finding out from them whether it is feasible or even needed—is an undeniably important step. Without this mutual understanding, the gift may not yield the results you are seeking.
When you are considering how to structure a gift, keep in mind that general operating support is the most flexible and desired support all nonprofits need.
Have you determined whether the gift would add value to the institution or organization?
Right-sizing the gift. Assessing whether an organization has the capacity to absorb a gift is critical. Giving a US$1 million grant to an organization with a US$250,000 budget could be disastrous. If you would like to provide significant funding, discuss with the organization whether it would be more useful for it to receive a one-time gift or instead a multiyear gift to allow for ramping up. Sometimes a large gift for a specific purpose is given to accelerate an organization’s strategic goal or to replicate a successful program or approach. Being transparent about how you will structure the gift allows the organization to plan effectively.
We have a client who, every year, makes one significant gift to an organization that is furthering one of her interests. Each gift is a standalone, to a different organization, and structured as a finite amount over a period of years—and this is made clear to the organization from the onset.
Clarity around the use of the funds. Be sure to articulate your expectations, and any conditions attached to the gift, in an award agreement or memorandum of understanding. It is important to clearly spell out the terms of the gift—one-time or multiyear—and any metrics that may affect funding decisions, whatever the use of funds.
It is also important that the organization or institution knows what you expect in terms of annual communications and reporting. Are there benchmarks you want them to meet? Is there a particular way you want to be provided information, and how frequently? Keep in mind that you never want to make any gift onerous in terms of what you ask of the organization or institution.
The more clarity you provide surrounding the gift, the greater the chance to avoid misunderstandings and strengthen your partnership with the grantee organization.
There are as many questions as answers when seeking to give strategically. We encourage you to carefully consider your intentions, have in-depth conversations, and communicate your decisions with recipients as well as those involved in your philanthropy.
Source: Exponent Philanthropy, Essentials (Summer 2016), 3-4.