Key Misperceptions in Philanthropy: Annual Meeting Aims to Educate Affluent Donors

People who decide to step up their philanthropy often have misperceptions about the charitable sector, according to Phil Buchanan, president of the Center for Effective Philanthropy in Cambridge, Massachusetts. One error donors make is underestimating the complexity of the challenges they will face in philanthropy, he said. Another is overestimating how much their business experience translates into effective giving.

It is important to guard against such misperceptions now, in the midst of a global pandemic, said Doug Bauer, executive director of the Clark Foundation, which works on anti-poverty issues in New York, where it is based. “This is the most complex environment for nonprofits I have seen in more than 30 years in the field,” added Bauer.

Both men spoke to an online audience of individual and family donors convened last month by Goldman Sachs Private Wealth Management for its annual Philanthropy Forum. The goal: providing information on viable philanthropic approaches. Attendees included people involved in multiple philanthropic endeavors, whether it be giving from their own donor-advised fund, serving on a nonprofit board or running a family foundation.

Getting donors up to speed

The presentation was valuable to Goldman Sachs clients who are new to philanthropy, said Karey Dye, president of the Goldman Sachs Philanthropy Fund, who moderated the discussion. Interest in charitable giving has been so keen that Goldman Sachs is planning additional content for its clients on topics such as “bold plays in philanthropy” and other issues such as mental health and the environment.

Given the extraordinary challenges facing nonprofits in this pandemic year, Bauer advised donors to assess how nonprofits have performed in the last eight months both financially and programmatically, as well as how well their board and staff have performed in the same period. “How did they pivot?” he said. “What is the plan for 2021 to be resilient and nimble?”

Buchanan cited a May survey of nonprofit organizations that illustrates the huge pressures charities are facing: In that survey, 80% of the organizations had tapped reserve funds, 60% had cut wages and/or benefits and fully half were planning layoffs. Those percentages are likely higher now, as the virus has wreaked months more of damage. Organizations feeling the most pain now, added Buchanan, tend to be those providing direct services such as housing and child care and charities serving disadvantaged populations.

Giving in a time of crisis

Given the pressures facing charities now, said Bauer, “donors need to think about general operating support and advocating for government support” for nonprofit organizations. “If you are a board member, you will be looked to for more support, Bauer said. “We’ve seen many trustees step up to ensure organizations’ survival.”

“Now is the time to expand giving and step up as best you can for others,” Buchanan said. After the pandemic is over, he added, “few will say in future years, ‘Wish we’d done less.’ We should be encouraging donors to give more for operating support and overhead. One study found that nonprofits had more impact when they had more administrative costs.”

The best philanthropists, said Buchanan, the author of “Giving Done Right,” bring humility to their charitable work, a commitment to a larger purpose or mission apart from themselves and the ability to listen intently. “Take time to really understand,” he said. “Talk to your peers in philanthropy. They are generous with their time. Listening is so key.”