The Future of Philanthropy

Society has traditionally been divided into sectors, the main three being the private (business), the public (government), and the nonprofit (charitable) sectors. The mission of the private sector is to create wealth and jobs; the mission of the public sector is to create law and order; the mission of the nonprofit sector is to relieve suffering and enhance the quality of life. There is much overlap in these missions, of course; for example, corporate foundations and government agencies frequently provide funds to nonprofit organizations. Most of the overlaps, however, have been strictly monetary in nature. Overlaps involving exchanges of intellectual capital have been much rarer.

During the 1980s, however, that long-standing conception began to change. Many factors drove this transformation. The Reaganera cuts in federal support forced nonprofits to become more entrepreneurial. According to figures compiled by Salamon (1992), fully half of the revenue of nonprofits is now derived from earned income, as compared to a mere 18 percent provided by philanthropy. Some nonprofits have even formed for-profit, tax-paying subsidiaries. Companies became concerned about the quality of entry workers'job skills and grew increasingly involved in educational systems and job training programs. For-profit companies have even taken on the administration of certain social welfare programs. Governments have increasingly looked to privatize institutions they historically operated, such as schools, transportation systems, and prisons. Companies also saw profit opportunities in realms once exclusively the province of the nonprofit sector, such as hospitals. In fact, during the 1990s, one of the highest growth areas in the foundation world came from endowments created by the conversion of nonprofit hospitals to for-profits. And the fastest-growing grantmaking institution of the 1990s was not a foundation but the Fidelity Investments Charitable Gift Fund, a charitable entity created by the Wall Street investment giant.

As the lines between the sectors began to blur, nimble nonprofits began to take on a hybrid appearance. City Year, the Boston-based youth service program, is a classic example. City Year was launched by a grant from the nonprofit Boston Foundation. It expanded with support from the corporate giving program of the for-profit Bank of Boston. It doubled in size with a major grant from the nonprofit W. K. Kellogg Foundation. Then federal funding, first from the Commission on National and Community Service, then from the AmeriCorps program of the Corporation for National Service, helped City Year expand to more than ten additional cities. Simultaneously, City Year entered into an agreement with the for-profit Timberland Company, which allowed Timber-land to use City Year in a marketing campaign in exchange for cash grants, gear for corps members, and the positive exposure created by Timberland's marketing.

The City Year example provides a glimpse of the future for philanthropy. Foundations will remain funders, of course, but are less likely to be sole funders, and even less likely to have only other foundations as funding partners. Grantees are likely to get support from across sectoral lines—private, public, and nonprofit. Support will come in the form of traditional grants but will also come in other guises, such as the $60 million marketing contract consummated in 1998 between the Boys and Girls Clubs of America and Coca-Cola. Foundations will undoubtedly be called on to give away more than money, for the time and expertise of their employees will be in high demand. In giving that time, the foundation employees are likely to rub shoulders with people based in for-profits, in nonprofits, and in units of government at every level. Rather than the traditional grantor-grantee relationship, there is likely to be a primary partnership between the foundation and the grantee organization, which will be woven into overlapping webs of partnerships among the organization and its various funders and partners.

Projects that cross the traditional lines have come to be called examples of intersectoral activity. The future will constitute a brave new intersectoral world, unquestionably different from the one that foundations inhabited during much of the twentieth century, but will it be better? Certainly, risks abound. The nonprofit sector is much smaller in terms of income and power than either of the other two sectors. There is a real concern that so-called intersectoral partnerships might really amount to nonprofits being pushed around by bigger and richer government and business players. Some fear that nonprofits, having inhabited a more genteel world, will be overwhelmed by the political machinations of government or the hardball tactics of business. Other critics warn that the corrupting influence of big money will sully the idealism and values of the nonprofits. More succinctly put, these critics are afraid that the lure of $60 million marketing deals will cause nonprofits to sell their souls.

The dangers are undeniably real, but so are the potential gains. The social problems with which the nonprofit sector is grappling have grown large, complex, interconnected, and deep rooted. It has become increasingly clear that no single sector of American life, especially not the smallest of the three, can hope to successfully take on these problems by itself. There is ample precedent in U.S. history for embracing the intersectoral model to tackle problems of daunting complexity. During World War II, for example, all sectors of society united to direct the nation's total resources toward the common goal of waging all-out war. The social problems of the early twenty-first century will undoubtedly prove to be the greatest threat to the republic since the military problem posed by the Axis powers in the 1940s. An intersectoral solution is thus just as imperative to promote the common good in the twenty-first century as it was to save democracy in the twentieth.

Foundations that view the current situation of society as the moral equivalent of war, to borrow the words of William James, have little choice but to join with all willing and honorable partners in common cause against the social villains of the times. The private and public sectors bring vast resources in their train: money, human ingenuity, and logistical support most particularly. As organizations form alliances across the old sectoral boundaries, they will unleash a formidable new force for the common good. The problems of making these partnerships work will be pervasive. The dangers will be real. But the enormous potential payoff makes these risks well worth taking.