Blog / Community Philanthropy

Giving Circles: A Way Forward for Democratizing Philanthropy

by Michael Layton
Giving Circles: A Way Forward for Democratizing Philanthropy

In a recent blog post, Isis Krause explained how research on giving circles helped to inspire the launch of Philanthropy Together, a “new nonprofit, co-created by hundreds of giving circle and collective giving network leaders, to help start new giving circles and help existing giving circles thrive.” Its ambitious mission is “to diversify and democratize philanthropy by connecting and catalyzing the field of giving circles.” Their mission is timely and urgent.

In this follow-up blog, I want to do two things. First, I want to place the current challenges to philanthropy in historical perspective, drawing on the parallels between our current historic moment and the Gilded Age.

Second, I will argue that the key characteristics and strengths of giving circles offer valuable insights about how to democratize philanthropy. Not only do giving circles themselves engage “new donors” who are more racially and socio-economically diverse, but their success in doing so offers compelling lessons to other institutional donors, fundraisers, and nonprofits.

“In this moment of crisis, giving circles offer a way forward toward more inclusionary and democratic philanthropic practice.”

Just as the invention of the community foundation represented a step forward in democratizing philanthropy in 1914, in 2021 giving circles offer an organizational innovation to take another step in that direction. In this moment of crisis, giving circles offer a way forward toward more inclusionary and democratic philanthropic practice.
 

A Second Gilded Age?

There are striking parallels between the crises of the decades that bracketed the beginning of the 20th and the 21st centuries:

  • the increasing concentration of wealth (monopolies arising from industrialization then, and from technological innovation now);
  • systemic violence against Blacks (lynchings then, video-recorded killings of unarmed Blacks now), giving rise to new organizations demanding action (the NAACP then, Black Lives Matter now);
  • intense political polarization, with pointed criticism aimed at the Senate as being corrupt and anti-democratic, and calls for reform (direct election of senators then, the end of the filibuster now); and,
  • the rise of foundations and donors of an unparalleled scale (private foundations established by robber barons then, dark money and donor advised funds now).

Mark Twain is said to have observed that history doesn’t repeat itself, but it rhymes: these heartbreaking couplets can make one question how much progress our nation has made in a century.
 

A Time of Opportunity

Perhaps such poetic pessimism is not completely warranted. In The Upswing: How America Came Together a Century Ago and How We Can Do It Again, Putnam and Shaylyn Romney Garrett (2020) offer a compelling analysis not only of these parallels but also of “the upswing” that occurred between those moments, an upswing in which the nation made significant progress in overcoming these same challenges. The rise of the Progressive movement, with its new forms of association and social movements, often backed by equally new forms of philanthropy from major donors and communities (e.g., community foundations and campaigns like the United Way), helped bring about transformative change.

Sadly, the progress we made in the course of the 20th century, in terms of greater income equality, a proliferation of associations, and higher levels of social trust, has unraveled in recent decades, landing the nation into uncomfortable, if familiar, territory.

“[T]he progress we made in the course of the 20th century, in terms of greater income equality, a proliferation of associations, and higher levels of social trust, has unraveled in recent decades, landing the nation into uncomfortable, if familiar, territory.”

One particularly troubling aspect of the current crisis is that charitable giving in the U.S. for the last two decades has stagnated at 2% of Gross Domestic Product (GDP). Worse yet, the number of households that donate is declining (Rooney, 2019). This means that big donors are giving more, and small donors are becoming scarce.

Thus, not only income and wealth but philanthropic giving is increasingly concentrated in the hands of the wealthy, and their influence over not only the market economy but even nonprofits is enhanced. In the words of Michael Moody, “The increased power that major donors have in an unequal giving landscape is one of the chief concerns raised by the democratic critiques of mega-giving” (Moody, 2019).

So how can these trends be slowed, or even reversed? What would it mean to democratize philanthropy, encouraging broader and deeper engagement?
 

Philanthropy’s Conundrum: How to Mobilize Wealth to Combat Inequality

In combating the social ills of their time, Progressive Era reformers launched a multitude of associations and embraced innovative forms of philanthropic and fundraising practices. One particularly important institutional innovation, the community foundation, was the brainchild of Frederick Harris Goff, an eminent civic leader in Cleveland. Known as a lawyer to John D. Rockefeller and Standard Oil, Goff became a pioneer in corporate social responsibility in banking.

Although he admired the ambition and impact of the private foundations launched by Rockefeller and Andrew Carnegie, Goff conceived of a different sort of philanthropic institution, one that would enable members of a community to pool and mobilize local resources to address local problems. Goff launched the first community foundation in 1914, with a goal to “build one local community foundation into a national movement” (Sacks, n.d.).

The challenging question that Putnam and Romney Garret pose for their readers in 2021 is, how do we launch our own upswing, embracing a stronger sense of shared public purpose and moving once again from “I” to “we”? Answering this question must take into account the fact that during the first upswing, as the authors recognize, that sense of “we” was often limited based upon race and gender (2020, especially chapters 6 & 7). This question has particular relevance and urgency for philanthropy, given the enormous potential — if not responsibility — that philanthropy has for promoting greater diversity, inclusion, and equity.

Like most aspects of life today compared to a century ago, we are confronted with an “increasingly complex philanthropic landscape” (Franklin, 2020). This landscape includes a variety of new mechanisms for channeling one’s generosity. Here, I want to contrast two of the most important ones, who share some key characteristics (including frequent sponsorship by community foundations and remarkable recent growth), but also strongly diverge in their potential for re-constituting a philanthropic “we”: donor advised funds (DAFs) and giving circles.
 

Donor Advised Funds

The first donor advised fund was established at The New York Community Trust in 1931 (Sacks, 2014). DAFs have gone on to find a multitude of sponsors and have emerged as a philanthropic powerhouse. In its most recent Donor-Advised Fund Report, the National Philanthropic Trust reports that in 2019, grantmaking from DAFs to nonprofits exceeded $25 billion (a 93% increase from 2015) and donors’ contributions to DAFs amounted to nearly $39 billion (an 80% increase from 2015) (National Philanthropic Trust, 2020).

While DAFs offer an important avenue that facilitates and encourages greater giving, they do present risks by exacerbating some of the pressing problems facing philanthropy, including a lack of transparency, the risk of parked assets, and a lack of accountability. These limitations have led to calls for greater giving from DAFs and for legal reforms, particularly in California (Villanueva, 2020).

“While DAFs offer an important avenue that facilitates and encourages greater giving, they do present risks by exacerbating some of the pressing problems facing philanthropy, including a lack of transparency, the risk of parked assets, and a lack of accountability.”

The downsides to this particular option for donors are analogous to what Putnam found in his classic 2000 book, i.e., that Americans continue to love bowling, but they are increasingly “bowling alone” rather than in leagues that encourage interaction and the generation of social capital (Putnam, 2000). Speaking philanthropically, DAFs encourage donating alone, providing no (or very limited) opportunity to develop further community ties through that act of philanthropy.

It is important to note that despite its limitations, the DAF model can be used in a participatory and transparent manner. One of the fiercest critics of DAFs, Edgar Villanueva, author of Decolonizing Wealth, used the DAF structure to create a much more accountable vehicle for collective giving, Liberated Capital (Villanueva, 2020).
 

Giving Circles

The second philanthropic instrument, the giving circle, is a form of giving through which groups “collectively donate money and sometimes unpaid time to support organizations or projects of mutual interest”: a critical aspect of their work is that together they undertake research on issues and potential grantees and reach a collective decision about where to direct their support (Bearman & Franklin, 2018)1. Unlike DAFs, there is little risk that philanthropic assets will remain undistributed, as funding organizations is an essential moment in a giving circle’s life cycle.

Philanthropy Together emphasizes the catalytic effect of combining the mobilization of resources together with the mobilization of people with shared values to bring about change, not only through their donations but through their volunteerism and voice (Philanthropy Together, n.d.). Philanthropy Together’s Launchpad, for instance — an online, interactive training program that helps individuals and institutional sponsors create giving circles — has trained 208 leaders, of whom, 80% are women and 58% self-identify as Black, Indigenous or People of Color (BIPOC) (Philanthropy Together, 2021).

Members of the Collective Giving Research Group have also demonstrated that giving circle membership tends to result in donors who give more and give to a wider array of organizations (Carboni and Eikenberry 2018; Eikenberry 2009; Eikenberry and Bearman 2009). Importantly, Carboni and Eikenberry found that giving circles’ donors tend to be more likely to give to people like themselves (the HERitage Giving Fund at the Texas Women’s Foundation, for instance, mobilizes Black women in giving to Black women and girls in north Texas), and also to people who are not like them (such as the Lunar Project, a solidarity circle that connects AAPI women in giving to Black and Indigenous people). “In the current context of philanthropic and wider societal attention to empowering marginalized groups, supporting [giving circles] presents philanthropy with a way to support and expand social justice and equity in philanthropy” (Carboni & Eikenberry, 2021).
 

Philanthropy’s Challenges: Giving Circles and the Philanthropic Ecosystem

Rising socio-economic inequality, contested control over philanthropic assets, and the lack of philanthropic support for communities of color and the work of social change are critical, unresolved issues looming over philanthropy (Behrens & Layton, 2021). Giving circles — in what they do and in what they can inspire others to do — offer a dynamic way forward for philanthropy in addressing these challenges.

How can this change take place? Giving circles are growing dramatically, from 1,600 to 3,000 by 2025, according to the ambitious goal set by Philanthropy Together. Giving Circles have tripled in number to approximately 1,600 giving groups since 2007. With over 46,000 members in all 50 states and the District of Columbia, and an estimated $1.29 billion in grants already distributed, their influence and impact in communities is already substantial (Bearman, Carboni, Eikenberry, & Franklin, 2017).

While foundations and DAFs together overshadow the size of resources being mobilized by giving circles, giving circles can make key contributions that include, but go beyond, the social capital generated among their participants: demonstrating how grantmaking can engage BIPOC communities, helping to redefine — and perhaps erase — the distinction between donors and recipients; providing support to social change organizations that would not receive support from foundations, much less government; and, mobilizing and engaging donors beyond making a monetary contribution, to becoming volunteers and cultivating their power as community leaders.

“[G]iving circles can make key contributions that include, but go beyond, the social capital generated among their participants[.]”

Private donors — including individuals, foundations, and corporations — play a unique role in the philanthropic ecosystem. As contrasted with income generated from fee-for-service work, contracts, and government funding, private donations have the potential of allowing for greater innovation and experimentation, including support for public policy advocacy (Fleishman, 2007; Payton & Moody, 2008).

While it is important to acknowledge the restrictions and conservatism that often characterize grantmakers, their contribution to promoting social justice is equally important to acknowledge (Council of Michigan Foundations, 2021). They are also playing a role in supporting giving circles. Some of the largest foundations in the U.S., including Bill and Melinda Gates, Ford, Charles Stewart Mott, and W.K. Kellogg, have all made contributions through their grantmaking and thought leadership to innovations in community philanthropy, including giving circles. In the words of a recent report from the W.K. Kellogg Foundation, “Giving circles are probably the single best expression of democratic philanthropy” (W.K. Kellogg Foundation, 2012).

Within the portion of that ecosystem constituted by donors, giving circles offer a powerful catalyst for changing how we think about community engagement, who is a philanthropist, and what every member of a community brings to the table. A Nonprofit Quarterly contributor and giving circle member Rob Meiksins (2021) concluded in his commentary on the democratizing potential of giving circles,

All in all, it does appear that giving circles represent a method for “everyday philanthropists,” as we like to call ourselves, to have a direct impact in our communities and give to causes close to our hearts. We do not have to wait for the large foundations or wealthy individuals to make the gift; we can come together and do it ourselves as a collective, and have a good time doing it.

Generosity, impact, connection, and fun — sounds like a winning combination, and a way forward for philanthropy.

Learn More
To learn more about giving circles, register for Philanthropy’s Together’s We Give Summit, which will conduct sessions throughout the month of May. To find a giving circle near where you live, or one that supports a cause close to your heart, check out their Global Giving Circle Directory.

Acknowledgments

The author gratefully acknowledges the contributions of: Eleanor Sacks, for enriching my understanding of Goff’s contribution to the community foundation movement; Isis Krause and Ilyasah Shabazz for expanding my knowledge of giving circles; Binh Ha, for finding the information and insights I was missing; Tory Martin, for making the argument clearer.

1 Bearman & Franklin, along with Eikenberry & Carboni were part of a Collective Giving Research Group that produced a series of reports on giving circles. For more information, visit https://johnsoncenter.org/collection/giving-circles/.


References

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