Dynamic & Disruptive Forces in the Philanthropic Ecosystem

Many of the forces driving the 21st century broadly — increased wealth inequality, the astronomical growth of data, a renewed attention to the reality of racial inequities — are driving significant change within philanthropy’s ecosystem, as well. Behrens and Layton explore further in this piece from our 11 Trends in Philanthropy for 2021 report.

At the Johnson Center, we think of philanthropy as an ecosystem of nonprofit organizations, individual donors, formal foundations of all types, and corporate giving programs. Essentially, it includes all of the nongovernmental entities who work toward improving our lives — that is, whose overall purpose is to express love of humanity.

The concept of an ecosystem comes from biology, where it is defined as a complex of living organisms, their physical environment, and their relationships in a particular unit of space. Increasingly, the word is being used to describe how organizations interact with each other and their environment. As Hwang (2014) noted,

An ecosystem … is about the dynamic interactions between things. It’s about how people meet, talk, trust, share, collaborate, team, experiment, and grow together. When an ecosystem thrives, it means that the people have developed patterns of behavior — or culture — that streamline the flow of ideas, talent, and capital throughout a system. (para. 11)

The concept of a nonprofit ecosystem got a boost from a 2008 article, “Cultivate Your Ecosystem,” in the Stanford Social Innovation Review by Paul N. Bloom and Gregory Dees. The authors argue that rather than finding gaps to fill, a social entrepreneur ought to understand where they fit as an entity within a larger, complex system.

“This trend of converging, overlapping, and nonlinear disruptions in the sector is likely to persist, elevating the demands on leaders to operate from an ecosystem perspective.”

In recent years, we’ve seen an increase in dynamic forces that are disrupting this philanthropic ecosystem. In previous years and in other trends we revisit in this report, we’ve described how some of these forces are affecting the sector. While complex systems are continually adapting to change, what has become apparent is that these trends are interacting in ways that were unforeseeable a decade ago. Some examples:

Wealth has become more concentrated. Megadonors — ultrahigh-net worth individuals and families who have amassed tremendous wealth — are making jaw-droppingly large contributions. At the same time, the small- to mid-size individual giving that has been a mainstay of nonprofit revenue is declining (Rooney, 2019). Total individual giving in the U.S. was $279 billion in 2016, up from $174 billion in 2000, but the percentage of households reporting having made a donation fell to 54%, down from 66% in 2000. Rooney also cites evidence that this trend is not limited to the U.S.

This shifting weight, rather than promoting the “reconciliation of the rich and the poor,” to borrow a phrase from Andrew Carnegie’s The Gospel of Wealth, means philanthropy is running the risk of becoming yet another social realm dominated by the rich. It may also reinforce the perception of an “Elite Charade of Changing the World” — the subtitle of Anand Giridharadas’ provocative, best-selling critique, Winners Take All. Rather than generating greater social capital and cohesion, philanthropy is another element aggravating divisions.

More giving mechanisms means more complexity for development teams. Donor-advised funds (DAFs) and online giving platforms have led to a broader array of giving mechanisms for individual donors of all levels of wealth. For nonprofits, this leads to a need for increasingly sophisticated fundraising strategies that incorporate social media savvy, technological sophistication, and extensive donor cultivation work. Add in a bit of gamesmanship with contest-like funding opportunities (the MacArthur Foundation’s 100 and Change project, for example) and you have a development role that requires an incredible juggling act on the part of development staff. DAFs, in particular, provide a challenge in terms of their opacity: it’s hard to make a pitch when you don’t know who controls the purse strings.

The amount of data available continues to grow. We’ve seen an incredible increase in the data available to understand markets, individual behaviors, and geographies. Nonprofit organizations and foundations are both users and providers of this data. However, we’re also seeing how these data can be misused, and there are persistent concerns about privacy and inequitable access to data. Sector leaders must now understand their legal obligations to protect privacy, evolving protocols for ensuring data are secure, and the many ways they could use data to further their missions. In addition, there is a risk that unequal access to data can exacerbate the gap between larger, better resourced nonprofits and financially strapped, smaller organizations.

Diversity, equity, and inclusion are becoming more central in philanthropy. The triple pandemics of COVID-19, economic insecurity, and racial injustice have accelerated and accentuated the urgency of the philanthropic sector’s struggle with the issues of racialized outcomes. It has prompted a reckoning with the sector’s complicity in maintaining structures that perpetuate racial and social inequality. The chronic underfunding of organizations led by Black, Indigenous, and people of color (BIPOC) leaders has become apparent (Dorsey, Bradach, & Kim, 2020). Good-faith efforts to promote diversity in the sector — such as foundations requiring grantees to report on the demographics of their boards and staff — may have led to a focus on diversity at the expense of inclusive practices. Focusing on diversity can lead to tokenism (Ho, 2017), with people of color used as racialized props, rather than addressing the critical issues underlying racial and social inequality.

The boundaries among the sectors continue to blur. The rise of social ventures and the blurring of roles among the business, government, and philanthropic sectors has created a demand for sector leaders who can negotiate new boundaries. What are the limits on philanthropic funding of infrastructure and human services that have traditionally been the purview of government? Can and should philanthropy play a role in overcoming the digital divide, for example? The rise of “for benefit” B corporations (see fourthsector.org, for example), is leading some to question whether much of the work traditionally done by the sector can be done more effectively by this new hybrid.

Even in their internal operations, lines are blurring. Over half of private foundations surveyed have part of their endowments in impact investments (Foundation Source, 2019), blurring the lines between business investments and philanthropy, investment manager and program officer.

This trend of converging, overlapping, and nonlinear disruptions in the sector is likely to persist, elevating the demands on leaders to operate from an ecosystem perspective. It will require greater collaboration between and among the entities that comprise the philanthropic ecosystem in which they are embedded. It will require new ways of training and bringing new leaders into the sector, cultivating the ability to work across what have traditionally been sectoral and socio-economic boundaries.

References

Bloom, P. N., & Dees, J. G. (2008, Winter). Cultivate your ecosystem. Stanford Social Innovation Review. https://ssir.org/articles/entry/cultivate_your_ecosystem

Dorsey, C., Bradach, J., & Kim, P. (2020, May 4). Racial equity and philanthropy: Disparities in funding for leaders of color leave impact on the table. The Bridgespan Group and Echoing Green. https://www.bridgespan.org/bridgespan/Images/articles/racial-equity-and-philanthropy/racial-equity-and-philanthropy.pdf

Foundation Source. (2019, November). Survey: Impact investing and private foundations. https://foundationsource.com/resources/library/impact-investing-and-private-foundations

Ho, H. K. (2017, September 18). 8 ways people of color are tokenized in nonprofits. Medium. https://medium.com/the-nonprofit-revolution/8-ways-people-of-color-are-tokenized-in-nonprofits-32138d0860c1

Hwang, V. W. (2014, April 16). The next big business buzzword: Ecosystem? Forbes. https://www.forbes.com/sites/victorhwang/2014/04/16/the-next-big-business-buzzword-ecosystem

Rooney, P. M. (2019, December 4). Where have all the donors gone? The continued decline of the small donor and the growth of megadonors. Nonprofit Quarterly. https://nonprofitquarterly.org/where-have-all-the-donors-gone-the-continued-decline-of-the-small-donor-and-the-growth-of-megadonors

Dynamic and Disruptive Forces are Increasingly at Work in Philanthropy

It’s Getting Harder and Harder to Distinguish Philanthropy and Business

Data Comes of Age in Philanthropy

Black Women Face Multiple Forms of Racism in Philanthropy

References