The new American philanthropists: Will their billions get results?

March 25, 2011, 9:00 AM UTC

Giving money to your favorite charity is important. Figuring out the smart way to give is essential.

By Thomas J. Tierney and Joel L. Fleishman

With his $100 million dollar gift to Newark’s public schools, 26-year-old Facebook founder Mark Zuckerberg joined the growing number of donors who are giving large portions of their estates while still living. The idea is that these talented business titans can put their skills to work to help change the world. Since Warren Buffett and Bill Gates asked the wealthy last year to give more of their wealth to charity, 50 American billionaires have pledged some $600 billion.

But will this outpouring of money lead to real results? While success in business can finance philanthropy, it does not insure its success. Nor is there any one-size-fits all prescription for donors who are focused on getting results. But in our experience, “smart givers” often ask themselves at least three critical questions:

  • How do I define success?
  • How can it be achieved?
  • What am I accountable for?

When Don Fisher stepped down as CEO of Gap (GPS), he and his wife Doris found themselves deeply concerned about the growing education gap.

The Fishers defined success not simply as helping kids, but as finding an educational model that could achieve strong results and then scaling it. After a full year of searching and learning, they homed in on the Knowledge Is Power Program (KIPP). At the time, KIPP was just two charter middle schools in Houston and New York City, but it fit the Fishers’ standards for excellence: a results orientation, high expectations for students, and visionary co-founders. At the outset, the Fishers committed $15 million, and then much more in the ensuing years. KIPP has grown to 99 schools in 19 states, teaching more than 26,000 students. The program is now nationally recognized as the gold standard in charter education.

Strategies for achieving success can take a variety of forms. Some involve intensive engagement. Bill and Melinda Gates have invested their time, reputation and influence to create a foundation that deeply pursues primary research, testing, and risk-taking. Other strategies involve innovative funding models. To that end, eBay (EBAY) founder Pierre Omidyar and his wife, Pam, set up Omidyar Network (ON), which makes for-profit equity investments in promising social enterprises such as d.light, a green energy provider in India. For still others, the best strategy may be to build on existing efforts. Warren Buffett’s $31 billion gift to the Bill & Melinda Gates Foundation is the biggest philanthropic piggyback in history — and a model for leveraging the work of other donors.

Which brings us to our third key question — what am I accountable for? The absence of market forces gives philanthropy the freedom to be creative and experiment; it also leads to its chronic underperformance. The pressure to deliver great results is a very personal choice that requires immense discipline, including the discipline to support not just promising programs, but also the people and systems necessary to produce great results.

Consider the journey of philanthropist and former investment banker Connie Duckworth, who joined the Department of State’s U.S.-Afghan Women’s Council post retirement. Believing that economic empowerment gives women control of their own destinies, she founded a nonprofit social enterprise called Arzu, focused on garment making.

But Duckworth discovered that the work was ill-suited to the norms of Afghanistan, where women were unable to leave their family compounds. So Arzu turned to rug-making, a traditional, home-based occupation. Learning from her on-the-ground involvement — holding herself accountable not just for being generous but for achieving real results – Duckworth has helped Arzu become one of the largest private employers of women in Afghanistan,

Innovation in philanthropy is not new. What is new is its scale, propelled by the twin resources of money and talent, and the growing understanding among a rising generation of donors that if they don’t impose excellence on themselves no one else will.

Thomas J. Tierney is co-founder and chairman of The Bridgespan Group, and advisor to nonprofits and philanthropy, and former worldwide managing director of Bain & Company. Joel Fleishman is faculty chair of the Duke Center for Strategic Philanthropy & Civil Society. Their new book, Give Smart: Philanthropy That Gets Results will publish this week.

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