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PROCEEDINGS OF THE AMERICAN PHILOSOPHICAL SOCIETY VOL. 149, NO. 2, JUNE 2005

What Does It Mean to Say that
Philanthropy is Effective?
The Philanthropists New Clothes

1

STANLEY N. KATZ

Professor, Woodrow Wilson School, Princeton University

O HEAR MANY TELL IT, something of a sea change has
taken place in the foundation world in recent years. There are,
it would seem, new ways of choosing whom to make grants to,
new ways of making grants, new ways of interacting with grantees,
new ways of assessing the effects of foundation grants. If we listen to
the way some philanthropists talk about what theyre doing, their enter-
prise is very different from what it was even a decade ago, never mind
at the birth of philanthropy. But if the practice of the new and
improved philanthropy is (as it is claimed to be) different from tradi-
tional philanthropy, it also seems that it is different in more than one
way: the new and improved foundation philanthropy is termed new
and improved; it is strategic; sometimes it is mission-driven; some-
times it is effective; sometimes it is venture philanthropy; sometimes
it achieves leverage. Depending on who is doing the telling, the new
and improved philanthropy is new and improved in what seem to be
quite different ways.
Now those of you who know what I have written and said about
foundations over the past several years will know that I have been skep-
tical about the directionor directionsfoundation philanthropy has
taken over this period. I have not changed my mind. I will try briey,
toward the end of this talk, to persuade you that there are reasons for
an audience of scholars and cultural administrators to be concerned
about this issue. But I will use the bulk of the talk to try to clarify the dif-
ferences between the various brands of new and improved philanthropy,
to the extent that there are any. This is important, I think, because at
the moment it seems to me that there is less consistency in the denotations

1

Read 23 April 2004, as part of the symposium Effective Philanthropy.

T
124

stanley n. katz

of the new catchwords of foundation philanthropy than there might
be about emerging behavioral changes in the foundation world. The
nominal changes proclaimed by foundation managers are, I will argue,
less profound than the consequences of the new assumptions about the
role of philanthropy that they mask. So I want in this talk to try to pro-
vide a taxonomy of these brands. This way, we will perhaps be able to
get a handle on what we are dealing with in the new world of philan-
thropy, and so to lay the groundwork for something of an assessment
of these developments.
I am going to focus on the three developments in the current nomi-
nalist campaign within the foundation sector that seem most important
to me, even though these are not the only new such developments claim-
ing to be out there: strategic philanthropy, effective philanthropy, and
venture philanthropy, and I am going to tackle them in that order.

Strategic Philanthropy

The kind of strategic philanthropy I am concerned with today is the
kind practiced by foundations. It is not as easy to nd a sentence-long
denition of this kind of strategic philanthropy as it is to nd a deni-
tion of the strategic philanthropy carried out by the corporate sector.
Instead, it seems that it is to be recognized by its descriptive character-
istics: one knows strategic philanthropy is taking place when certain
things are being done, and done in a certain way. Justice Stewarts de-
nition of pornography seems in point here. For instance, one of the early
academic contributions to the debate about strategic philanthropy is
Porter and Kramers Philanthropys New Agenda: Creating Value.
Porter and Kramer argue that strategic philanthropy entails doing four
(somewhat overlapping) things: (a) achieving (measurable) superior per-
formance in a specic area; (b) choosing a unique positioning; (c) engag-
ing in unique activities; and (d) forgoing some grantmaking opportunities
in order to focus on others.

2

Indeed, it is accepting that one cant do
everything that Porter and Kramer think is most important: Deciding
what not to do is the acid test of whether a foundation (or any organi-
zation, for that matter) has a strategy.

3

Kramer suggests, in a later
article of his own, that the three elements of strategic philanthropy are
identifying the change one hopes to bring about, clarifying internal
values and strengths, and ascertaining external needs, and that it is

2

Michael E. Porter and Mark R. Kramer, Philanthropys New Agenda: Creating Value,

Harvard Business Review

, November/December 1999, 12627.

3

Ibid., 127.
effective philanthropy

125

only by undertaking all three simultaneously that a fully formed strat-
egy, capable of evaluation, can be achieved.

4

This, I must confess, I do not nd very enlightening. Perhaps because
the description of the things one must do to be a strategic philanthro-
pist is so abstract, Im not sure I would ever know it by its alleged char-
acteristics. Porter and Kramer do provide some examples, but they are
of an odd sort, seeming almost to undercut their claims about strategic
philanthropyespecially its novelty. For example, they refer approv-
ingly to Ford and Rockefeller grantmaking on the Green Revolution,
and Carnegies impact on education. Then they write, It is work of
this kindnot only pursuing knowledge breakthroughs and establish-
ing pilot projects but also pushing them through to fruitionthat we
tend to associate with foundations of an earlier era. Today some foun-
dations are carrying out activities with such potentially high impact.
The Pew Charitable Trust, for example, recently created the Pew Cen-
ter on Global Climate Change to study global warming, educate the
public, and coordinate international negotiations.

5

But if foundations
of an earlier era did what strategic philanthropy would have todays
foundations do, its difcult to see what the concept of strategic philan-
thropy is adding to the debate.
Perhaps an actual and self-proclaimed

practitioner

of strategic phi-
lanthropy will fare better. Rebecca Rimel of the Pew Charitable Trusts
is more informative than Porter and Kramer. Here is her denition of
strategic philanthropy:

For us, strategic grantmaking has a well-dened goal that is larger
than that of a single project. A single grant cannot be strategic in
itself. It must be part of a cluster of grants that have a focus. At the
same time, that single grant has an explicit and achievable objective.
Strategic grantmaking also has a discernible impact on a problem. We
have to do more than offer Band-Aids and, ideally, work on more
than symptoms. We aim to identify underlying causes, because attack-
ing them is the only way that nite resources can make a difference.

6

Now, one might start with thinking that to describe this assemblage
of injunctions (most of them none too new and rather obvious) as

stra-
tegic

philanthropy and as a signicant departure from existing grant-
making practices is a little grand. But this is not what strikes me most
forcefully when I read and hear about strategic philanthropy. Rather, I

4

Mark R. Kramer, Strategic Confusion,

Foundation News and Commentary

, May/June
2001, 44.

5

Porter and Kramer, Philanthropys New Agenda, 125.

6

Rebecca W. Rimel, Strategic Philanthropy: Pews Approach to Matching Needs with
Resources,

Health Affairs

18/3 (May/June 1999): 22930.
126

stanley n. katz

am struck by a powerful feeling of dj vu, because I have seen this
stress on addressing causes rather than symptoms before, in the thinking
of the very earliest American foundation creators, Andrew Carnegie
and John D. Rockefeller. Indeed, I would claim (and in fact Barry Karl
and I did so some three decades ago) that what is distinctive about the
rich donors in America in the late nineteenth century is that they aimed
their giving squarely at causes and

not

at symptoms; or, to put it an-
other way, they practiced what we now call philanthropy rather than
charity. That the great American philanthropists have always attempted
to attend to underlying causes is what makes them philanthropists,
even if they sometimes made conventional charitable grantspalliative
givingas well. So I am bemused to see the claim that foundations
should aim at root causes touted as a new claim. It may be that modern
foundations have lost their way in this fundamental philanthropic quest,
and are today doing too much in the way of symptom-alleviating and
not enough in the way of cause-addressing grantmaking. But the solu-
tion lies in returning to what was best in the past. Much of the cur-
rent foundation promotional rhetoric seems to me to bespeak a troubling
lack of knowledge about the history of the great and large American
foundations.

Effective Philanthropy

Much has also been written and said about effective philanthropy.
What lies behind the use of the term effective philanthropy, I think,
is the justiable anxiety among foundation leaders, boards, and staffs
about whether they and their work are, in fact, effective. Joel Fleish-
man, formerly of Atlantic Philanthropies, is one of the many who have
hinted that this is what might be at issue. At a recent colloquium orga-
nized bywho else?The Center for Effective Philanthropy, he made
the familiar point that foundations dont have market or re-election
pressures to keep them on the straight and narrow. As a result, they
have little reason or incentive to measure and seek to understand the
effectiveness of their grantmaking and to maximize its impact. This is
not automatically to assert that foundations make no impact; Fleish-
man went on to say, I believe foundations do make a difference. He
nished that sentence, though, by asking, But where are the data?

7

Fleishmans concern is one shared, it would seem, by many foundation
leaders and staffs, and is one heightened by the periodic pressures

7

Joel Fleishman, quoted in The Center for Effective Philanthropy, Assessing Foundation
Performance: Current Practices, Future PossibilitiesLessons Learned from a Gathering of
Foundation Leaders, Boston, 1415 November 2002, 4.
effective philanthropy

127

foundations face to show that they make a difference and deserve the
special status and privileges they enjoy.
I think Fleishmans questionwhere are the data?picks out the
feature that goes to the heart of the question. Like strategic philan-
thropy, effective philanthropy is difcult to dene, but what particu-
larly seems to characterize it is that it seeks to measure its impact and
by so doing to increase that impact. This, to put it perhaps over-simply,
is whats effective about effective philanthropy: it focuses on the mea-
surement and evaluation of foundation efforts, programs, impact, and
performance. In another Center for Effective Philanthropy publication,
we read that foundation CEOs are . . . convinced that accountability
and performance measures will help us better reach the social out-
comes we seek. The question is no longer

whether

to measure, but

how

to do so constructively. . . . This sentiment appears to represent a
substantial shift in thinking in the foundation eld.

8

This is true, even
as the Center admits that [f]ew foundation executives we spoke with
expressed condence in their current ability to assess impact, but there
was a widely shared sense of resolve among all of them to push further
in this area.

9

It also begs the question of what accountability means in
the foundation sectorbut my response to that question will have to
wait for another paper.
It is to the credit of the advocates of effective philanthropy that
very few of them make light of the difculties involved in measuring
impact. Doing so takes time and money, and lots of it, and social sci-
ence skills that are as yet imperfectly developed. For all the time and
money in the foundation world may be unable to deal with the prob-
lem of causalityestablishing that some achieved outcome that was
aimed at by a foundation grant or program was achieved

by

that grant
or program. This is why we often nd effective philanthropy straying
from attempting the most rigorous forms of assessment and measure-
ment into nding proxies for performance, such as whether grantees
have been strengthened, or how much inuence a foundation has in
its eld, or whether it is able to persuade other foundations to fund its
grantees (whether the foundation has what has become known as
leverage).

10

I mentioned earlier that in some respects it is difcult to distinguish
the new philanthropic approaches from one another, that they share

8

The Center for Effective Philanthropy, Toward a Common Language: Listening to
Foundation CEOs and Other Experts Talk About Performance Measurement in
Philanthropy, 2002, 5.

9

Ibid., 8.

10

Ibid., 78.
128

stanley n. katz

features and emphasis. Heres a case in point: effective and strategic
philanthropy coincide in stressing the importance of focus. You will re-
call that Porter and Kramer argued that deciding what things not to do
is the most important decision philanthropy can make. So, too, effec-
tive philanthropy calls for focus. As the Center for Effective Philan-
thropy has it, [a] decade ago, some foundations were content to fund
a disparate collection of projects within their elds of interest, trusting
that they had done their part and that their grantees would be in the
best position to identify and ll social needs. One CEO described it as
letting a thousand owers bloom. None of the CEOs we interviewed,
however, subscribes to this approach today. These CEOs believe that
foundations must know at the outset what they are seeking to achieve.
You have to begin with the end in mind, said one foundation CEO.
You need a well-articulated roadmap.

11

This logic of deep focus re-
quires that foundations (a) select a eld, (b) establish specic and
achievable goals, and (c) choose an approach.

12

I do not have time this
morning to do justice to this issue, but let me suggest here that the deep
problem of philanthropic strategy is not deciding what to achieve, but
knowing beforehand what is the most likely method of reaching the
desired end. To think that there are simple answers to this question is
to overestimate the effectiveness of contemporary social science.

Venture Philanthropy

Venture philanthropy is, I believe, the hottest trend in modern phi-
lanthropy, and the one that has made the biggest splash. It is easier to
dene than strategic or effective philanthropy. Venture philanthropy is
the attempt to apply the techniques of venture capital to philanthropy.
I dont know that anyone can be credited with giving birth to the con-
cept of venture philanthropy. I suspect it arose in the West, and I dont
know who coined the phrase, but Christine Letts, William Ryan, and
Allen Grossman were certainly in the vanguard with their

Harvard Busi-
ness Review

article of 1997. They point to the similar challenges foun-
dations and venture capital rms face: selecting the most worthy
recipients of funding, relying on young organizations to implement
ideas, and being accountable to the third party whose funds they are
investing.

13

If they face similar challenges, Letts and her colleagues go

11

Ibid., 9.

12

Ibid., 910.

13

Christine W. Letts, William Ryan, and Allen Grossman, Virtuous Capital: What
Foundations Can Learn from Venture Capitalists,

Harvard Business Review

, March/April
1997, 37.
effective philanthropy

129

on to argue, can philanthropic foundations not learn something from
the way venture capital rms run their operations? (Of course, it was
more plausible and certainly cooler to suggest this predot.com-crash
than it is now; but we should avoid throwing the baby out with the
bathwater.)
For most venture philanthropists, the primary lesson that founda-
tions should take from venture capitalism is to focus more on ensuring
the long-term development of their granteestheir capacities and skills,
infrastructure, networks, organizational abilityand perhaps a little
less on program efcacy.

14

The suggestion is that foundations should
build closer and longer-term relationships with grantees, offering them
expertise, advice, and consultation about organizational growth, as
well as simply providing funding.
But this is not all there is to venture philanthropy; it also involves
the setting of goals and standards, which makes it look rather like
effective and strategic philanthropy. Here is Mark Kramers composite
picture of venture philanthropy, for example:

Venture philanthropy has never been precisely dened, but it gener-
ally emphasizes a few common principles. The rst is helping non-
prot groups gain the capacity to serve more people more effectively
by building the infrastructure and management capacity of the orga-
nization. Second is that grant makers are highly engaged, bringing not
just money but also management assistance through a close and long-
term involvement with grant recipients. Third, clear benchmarks of
performance are jointly developed by both the grant makers and recip-
ients, and future support is contingent on meeting these goals.

15

These, then, are the rudiments of venture philanthropy. Some very big
claims have been and are being made about it.
But however much money venture philanthropic enterprises can be
expected to lose or make, and whatever positive consequences it might
have for grantees and their programs, I am going to assert again that
this nominally new approach is not really telling us to do anything we
didnt already know to do (or, at least, should have known to do). I
cannot do much better here than quote Kramer at some length:

[T]he three main elements of venture philanthropybuilding operat-
ing capacity, close engagement between donors and recipients, and clear
performance expectationsare not new at all. Many would argue
that those have been the trademarks of effective philanthropists for
decades, and that they were well on the rise long before venture phi-

14

Ibid., 38.

15

Mark R. Kramer, Will Venture Philanthropy Leave a Lasting Mark on Charitable
Giving?

Chronicle of Philanthropy

, 2 May 2002, 38.
130

stanley n. katz

lanthropy gained public attention. . . . Perhaps venture philanthropy
is more of an evolution than the revolution it rst seemed to be.
Already, it is beginning to blend in, taking its place as one style of
grantmaking among many. . . . In short, venture philanthropys great-
est lasting effect may be to reinforce a few basic principles of effective
philanthropy that were already emerging. And, like many of the dot-
coms that made venture capitalists so successful for a while, what
seemed so new about venture philanthropy may have been the sizzle,
not the content.

16

Conclusion

So far, I have tried just to lay out the lineaments of and so distinguish
three new approaches to philanthropy. I concede that I have not
been able to draw rm boundaries between them, and this is in part
because there is a strong family resemblance among them. I am
reminded of the wit who said, presumably of some work of art or liter-
ature not his own, that what was good in it was not new, and what was
new in it was not good.
My intention today is simply to alert you to the nature of the
emerging rhetoric of the new philanthropy, and to suggest that it is
not really so new. But the proof of the pudding is not in the rhetoric
but in the reality of foundation behavior, and that is a more complex
subject. For now I simply want to suggest the potential implications of
the emerging rhetoric for the older and larger foundations that have
been the principal sources of funding for most of the individuals and
institutions represented in the Society. My contention is that the effect
of these ideas may be signicant for donees in the university research
community.
Increasingly, the large and relatively old foundations on which we
depend are indeed becoming more focused on highly selective areas
of grantmaking (and therefore on requiring very specic goals), more
insistent on short-term, specic, and measurable results, less inclined to
be interested in research (especially basic research), and more inclined
to go to contract agencies (think tanks) than to universities to have the
projects they favor carried out. They are also increasingly proactive
rather than reactive with regard to projects.
All of this means that the old system of collaboration between
university-based researchers and the big foundations is giving way
to a much more selective, competitive relationship that may no longer
amount to a research funding system. There will be pressure on univer-

16

Ibid., 38.
effective philanthropy

131

sity researchers and development ofcers to tailor their programs to
specic emerging foundation interests, to restrict their temporal range,
and to limit the riskiness of what they do. This may be good for foun-
dations, but it is not good for universities. And insofar as the original
intuition of philanthropy was that research was at the core of the foun-
dations quest for the root causes of human problems, fundamental
changes in philanthropic commitment to research represent a poten-
tially deep change in the social role of foundations. To this extent,
there is indeed something new in the new philanthropy. And the higher
education community would do well to worry about it.
The traditional twentieth-century partnership of universities and
foundations has produced signicant results, in terms both of abstract
knowledge and of concrete contributions to human welfare. There may
be better ways for the two sectors to collaborate in the future, but I
would hope that the foundations would think long and hard about
what they are giving up in dening effectiveness in a narrow (and poten-
tially unimaginative) manner. For universities, the alternative sources of
funding are governments, corporations, and individuals. Of these, only
the government is likely to respond positively and on a large scale to
the research needs of the universities. Given the emerging decit envi-
ronment of federal and state governments, this should give us pause.
And so should the specter of moving to a more European-style research
funding environment. One of the glories of the American approach has
been its uniquely public/private partnership. I hope we can rethink it
rather than discard it. I am not worried about the heart in philan-
thropy. I am worried about its mind.