How To Become A Catalytic Donor

This week, Australian social change advocates Dawn O’Neil AM and Kerry Graham talk about the crucial role of funders and draw on examples of how philanthropy in particular has been instrumental in driving a movement of change towards a collective impact approach.

Over the past few months we have been writing about the elements, opportunities and examples that the US-pioneered Collective Impact framework could offer us as we tackle Australia’s most complex social challenges. In the US, philanthropists have been instrumental in driving the adoption of collective impact approaches. We believe the same leadership is needed in Australia.

In Australia, philanthropy’s contribution to social change is estimated at $1.5 billion each year. While this is a significant contribution, it is relatively small when compared to the contribution of government or the social sector itself. As such, we proffer that philanthropy is best place to fund innovation and new approaches to social change. In short, philanthropists could play the role of being catalytic donors.

Consulting firm FSG, who produced the seminal article on Collective Impact, has generated a considerable body of work on the catalytic role of US philanthropy in Collective Impact. In this blog we draw of this work to understand the nature of catalytic philanthropy and the conditions required for it be fostered in Australia.

In 2011 three FSG authors – Leslie Crutchfield, John Kania and Mark Kramer – wrote a compelling book named “Do more than give: The Six Practices of Donors Who Change the World”. This book examines the modern role of philanthropy, moving from merely "giving away money" to becoming "active participants in the business of solving social and environmental problems."

Crutchfield states that “we wrote Do More than Give because we believe that, if society is to solve the complex problems that challenge our world today, then philanthropy must change. Nearly $300 billion is donated annually in the United States alone, yet progress toward addressing major issues—public school reform, health care access for the poor, climate change—remains stunted. At the same time, a relative handful of exceptional philanthropists have contributed to creating significant positive change. We wanted to study a cross-section of these exemplary donors and understand the practices they employ to achieve real
results.”

The authors found there were six practices of these exemplary – or catalytic – philanthropists, being:

1. Advocate for Change. Advocacy is an uncomfortable concept for many donors. Most prefer to fund direct service programs that produce immediately tangible results. But system-wide change is rarely achieved without advocacy—including raising awareness and educating the public on issues, as well as direct lobbying. Catalytic donors overcame their aversion to advocacy and were able to more effectively advance causes.

2. Blend Pro?t with Purpose. Catalytic donors who want to solve problems seek ways to harness the power of free markets and apply their business know-how to solving social and environmental problems. They look internally—examining their investment portfolios for opportunities to conduct shareholder advocacy, for instance. And they look externally, seeking opportunities to invest in self-sustaining enterprises that generate profits and societal change.

3. Forge Not for Profit Peer Networks. Donors are in a unique position to recognize needs across entire fields, build alliances, and foster collaboration between nonprofits which otherwise are often locked in a competitive cycle pursuing independent strategies as they vie for scarce resources. Instead of falling prey to “the paradigm of isolated impact” and picking one or a few Not for Profits to back, high-impact donors find ways to motivate the entire field or ecosystem of players to work more effectively together and advance larger causes. Catalytic donors see the forest through the trees.

4. Empower the People. Catalytic donors don’t treat individual community members who are affected by problems such as poverty or sub-standard health care as “charity recipients.” Instead, they view local individuals as essential participants in the process of solving problems—for themselves. Catalytic donors solicit the community for ideas and involve members in campaigns in building the political will and organising them to create change at the block, neighborhood, regional, national, and even global levels.

5. Lead Adaptively. To work effectively across all sectors of society— government, business, Not for Profit and individual—catalytic donors have the unique ability to orchestrate, subtly but persistently, the activities of key players to achieve collective wins. Catalytic donors are inordinately influential—not because they hold the formal authority afforded to elected officials or the CEOs of foundations and corporations—but because they lead adaptively.

6. Learn to Create Change. Catalytic donors are obsessed with measuring and evaluating their own performance as well as the effectiveness of their grantees. While this already sets them apart from most donors, catalytic donors don’t conduct evaluations in the conventional sense of the term. They are less interested in receiving reports on past progress and more interested in building systems that enable them to learn what’s working, what’s not working, and shift their strategies going forward.

In another piece of work, FSG examined the key success factors that create the conditions for donors to become catalytic, being:

1. Institutional adaptability means funders are willing to work outside of traditional grant cycles and well-established internal processes towards a more flexible approach. They also need an ability to be nimble in pursuing opportunities as they arise, without being prescriptive about the outcome. And they need to be willing to learn new skill sets including partnering, facilitation, communication, community engagement and convening.

2. A culture shift is required to develop a level of comfort around uncertainty and adaptability particularly during the process of engaging with communities and stakeholders. Effective funders need to develop an awareness of the shift in the power dynamic among funders, grantees and other stakeholders and an openness to funding infrastructure, which is often seen as less attractive than funding direct services or interventions.

3. A commitment towards long-term orientation to achieve progress on specific issues. This long-term commitment is needed regardless of who has contributed particular funding and effort, or how attribution is determined. It’s vital that there is a clear understanding that long- term change – and particularly systemic change – requires a long-term commitment from funders

Catalytic philanthropy is not yet a strong feature of the Australian philanthropic landscape. We see great opportunity for leadership in this area and, pleasingly, small signs of interest and emergence from progressive philanthropists. Australia has much to gain from catalytic philanthropy – as in the US, it has the potential to drive the structured collaboration required to make a difference to our most entrenched and complex social challenges.

About the authors: Dawn O’Neil AM and Kerry Graham have just undertaken a Collective Impact study tour in the USA on behalf of the Centre for Social Impact. Their vision is to translate Collective Impact into the Australian context.