What if Philanthropy Became Donor-Friendly?

The Catalogue believes that philanthropy can be one of the most enjoyable and personally satisfying parts of our lives, right up there with our other favorite activities, playing a key role in defining who we are and how our lives acquire meaning — for ourselves, for others and for the world around us. We favor, in other words, the Classical view of philanthropy as one of the highest forms of continuing education, or self-development.

We also believe that if more of us were more deeply engaged in philanthropy — helping others, making the world a better place — we all, starting with ourselves, our children, and our grandchildren, everyone, would benefit — be happier, more productive, and more successful.

Now: If you were to design a system that would make it as easy, interesting, and attractive as possible for people to get more involved in philanthropy, what would that be?

Almost certainly it would not be the system we have had, in which individual charities reach out to individual donors and volunteers, or vice-versa, finding each other more or less accidentally — from people we know, from the media, or from the uninvited junk streaming through our mailboxes on its way to the trash. This system was tried, with increasing professionalism, for the last 50 years; it had many great successes, but there is general agreement that we can all do better; the emergence of “donor education” as a field is evidence of this. Giving has been flat throughout that period at just under 2% of Adjusted Gross Income; the younger “new and emerging donors” are explicitly turning away from traditional philanthropy, looking for new ways to be involved. Philanthropy is increasingly recognized to be in a period of paradigm shift, as new technologies are brought to bear on it.

Donors will influence changes
No one can say at this point what the new paradigm will be, but it is clear that new information technology will powerfully inform it, and that it will be consciously donor-oriented. The sector is growing so fast that new money will have to be found; neither government nor corporations will provide it, so individual donors — who already provide 85% of the private dollars in philanthropy (foundations 10%, corporations 5%), and who can readily afford to give much more — have the greatest potential.

Massachusetts is particularly interesting; we are the 13th state in population; we usually rank third in income and in the 40s in Average Itemized Charitable Giving, so we have growth potential there. That is why the Catalogue began here, as an experiment by leading foundations, corporations and donors, to increase our giving. In our first four years, from 1997-2000, it nearly doubled, from just under $2 billion to nearly $4 billion annually, leading the nation. Income grew nationwide by 39% and giving by 62%; here income also rose by 39% but giving grew by 96.6%. The recession and Sept. 11 knocked us back a bit — not all the way, significantly — but we are now heading back upward, having proven that we can.

Since 1997, the Catalogue has evolved into a system of mutually reinforcing parts. We began with the Generosity Index raising the issue, and this Catalogue responding constructively, with innovative ideas, vocabulary, rhetoric, and a taxonomy enabling an organized presentation of the field. We soon added our cumulative website, State Giving Days, and “Catalogue-in-a-Box” webware to enhance the system’s operation here and facilitate its replication elsewhere. After nine years developing this system, our philanthropic sector is now the most visible and accessible to donors, in greater detail and with deeper understanding, in the nation.

We are now ready to take a next big step: to identify, chart, and map — for donors, grantmakers, and strategists — the entire sector that is of general philanthropic interest. This will position the Catalogue for Philanthropy as a central resource on the Internet, for donors statewide and beyond, to visit, survey, explore, and discover for themselves as participants, the Massachusetts sector as a whole — and where they would like to get more involved, to make a difference. Our sector will be for the first time fully visible, transparent, and accessible to the entire Massachusetts philanthropic community.

This project will take two years to develop, and will need continuous updating and further elaboration. The first installment is nearly 2,600 Massachusetts charities of general philanthropic interest with budgets below $3 million — our usual Catalogue constituency; next year we shall add the relatively few (several hundred?) large charitable institutions, of which Massachusetts has many world leaders, well-known to the donating public.

This could not have been done without four relatively new tools:
1) a complete list of all Massachusetts charities, now freely available online and annually updated from the IRS, based on its most recent Form 990s;
2) a donor-friendly taxonomy, or systematic categorization of philanthropic fields, which we originated and have been refining;
3) Google, to identify charities’ fields from their names; and
4) computer mapping, that will enable geographic analyses of the distribution of philanthropic services across Massachusetts.

The rubric, “general philanthropic interest,” is objective. In pruning the original IRS list of over 7,000 public charities, we noticed that they exist on three tiers, defined by the issues they address, and the scope of their fundraising. Some are only of internal philanthropic interest to their members who support them; others are of local interest, within their own communities who support them; still others are of “general philanthropic interest” — addressing broad public issues, for broad public benefit, and supported by the general public. The Catalogue focuses on the third group for obvious reasons. Every community foundation, however, would benefit from a complete census of its region’s charities, classified according to these three tiers. Most discussions of philanthropy would be refined by this typology, which informs institutional needs, capabilities, benefits, and other organizational characteristics.

These criteria enabled a significant discovery: that there are only 2,578 small-to-mid-sized charities of “general philanthropic interest” in Massachusetts — far fewer than anyone has thought. This is a rough number, based on our first scan of the data; we invite its refinement by charities themselves by clicking here; every charity can check its own classification and let us know if and why they feel it should be changed.

We organized the list according to our donor-friendly taxonomy, categorizing each organization by field of philanthropic activity. This, too, is a “working draft,” inviting correction by the charities themselves — we are all on the same team here.

Admittedly, our taxonomy needs work; to organize 70-100 charities in a single edition is simpler than organizing 713 charities for presentation on our website, and far simpler than organizing nearly 2,600 charities for universal reference. Moreover, all taxonomies run up against subtleties and complexities of reality; biological taxonomy since Linnaeus is an increasingly refined, continuous science. But taxonomies are powerful instruments, so we all keep refining them, learning as we go. Please let us know if a charity can be reclassified more usefully, for itself and others.

Analyzing the numbers
What have we learned so far? Our taxonomy indicates that about half of Massachusetts’ moderately-sized charities of general interest are in Human Services (1,344, or 52%); about one-third are in Culture (907, or 35%); only about 200 (8%) are in Nature (many land trusts do not have to file 990s); only 81 (3%) are focused on International issues, and only 36 (1%) are dedicated to Promoting Philanthropy — strengthening other charities.

The 990s allow a rough approximation of the total and the comparative dollar incomes of the various fields; these numbers are from 2003-04, because our list is from January 2005, based on tax forms filed at the end of charities’ fiscal years, which do not necessarily coincide with calendar years — an inescapable limitation of the 990s as the sole source of this data. In dollars, Human Services received $964.6 million (59%); Culture $475.3 million (29%); Nature $126.2 million (7.7%); International $40.9 million (2.5%); and Promoting Philanthropy $27.9 million (1.7%). The total income to these 2,578 small-to-mid-sized Massachusetts charities was $1.635 billion — considerable, but less than Harvard University’s annual budget, for example.

Mapping these data further will enable surveys of the distribution of philanthropic services across the Commonwealth by organizations’ dollars, and perhaps even populations served — which will be of new and significant strategic value.

The income numbers also reveal fiscal structures of the sector and its fields. It appears that only 176 (6.8%) of these charities had incomes over $2 million; twice as many (378 or 14.7%) had incomes from $1-2 million; the next group, between $500,000 to $1 million, equals both of the prior groups together (561, or 21.8%); twice as many as those (1,148 or 44.5%) received $100,000-$499,999; only 316 (12.3%) had less than $100,000. From these data, the number of large charities (greater than $3 million income) is small, but their income is huge. That is why almost all numbers about Massachusetts philanthropy as a whole have to be unpacked to be meaningful.

From their dates of IRS designation as public 501(c)3 charities (not the dates when they were created, which is much different in Massachusetts), we can observe the growth of the whole and its parts in public fundraising, especially in the past 50 years. In numbers of charities, the sector increased steadily; by 1949 Massachusetts had only 128 public charities; since then, growth by decade for all fields has been: 78 in the ’50s; 120 in the ’60s; 424 in the ’70s; 600 in the ’80s; 874 in the ’90s; and 329 so far in this century. Both the number, and the rate of increase, have steadily increased.

These data have many strategic ramifications, but perhaps the main conclusion is that philanthropy itself is on the verge of becoming systematic — for donors, grantmakers, and strategists. This transformation from the old paradigm’s individualistic mode, to a technology-enabled systems mode, is both progressive and inevitable. The philanthropic sector as a whole can now be portrayed, charted, mapped, and analyzed comprehensively and in detail.

Armed with that knowledge, donors can navigate and explore it to find where they would most like to make their contributions. Some will support entire fields or subfields of philanthropy, or several charities in the same field, in order to make a difference to that field or to a public issue addressed by the field. The old paradigm did not allow that; this new technology enables and promotes it, by positively illuminating countless new possibilities, which will attract new and deeper engagement by donors in philanthropy. This is an entirely new kind of donor- friendliness — now by the sector as a whole. That is our object.