My friend Susan is a fan of my blog and usually sends a note to say that she agreed with what I wrote that week. But not when she read my post, “An Approach to Funding That Might Actually Work.”
“What’s your big problem with perpetual endowments?” she asked. “I don’t have kids, and I want to leave my mark in the world. I really like the idea of creating a fund with my name on it that will work forever for a cause I care about.”
Susan, a wonderful woman and an active environmentalist, in this case is being very traditional. And she’s not alone. Nearly every time I question the assumption that permanent endowments are a godsend for each and every nonprofit, people respond with shock. But question it I do.
Here’s how I responded to Susan:
“Let’s say you leave $250,000 to create the Susan Fund at the local land conservation organization. The Susan Fund would spill out $10,000 or $12,000 a year to support the group’s operations – or, perhaps, a specific part of the operations. Not bad. But not transformational.
“But let’s say instead that you create the Susan Environmental Leadership Fund at the same organization. The Susan Environmental Leadership Fund is set up so that, each year for ten years, the fund provides the organization with $25,000 plus earnings as an internship honorarium for one of the country’s most promising environmental studies students.
“Over the years, those ten interns would make a significant impact on the organization, but more importantly they would then go out into the field after their internships are over and do important work. They would become environmental leaders, working for half a century or so each to preserve the planet. That’s 500 total person years of productive work for the cause you care about – and these ten Susan Environmental Leadership Fund alumni will affect hundreds of other staff members and volunteers (and, of course, the environment!) along the way.”
True: after ten years and ten interns, Susan’s fund will be used up. But wouldn’t the ongoing living impact of so many environmental leaders be a more significant legacy than a fund created in perpetuity?
One of my great heroes is Jackie Robinson, who said, “A life is not important except in the impact it has on other lives.” I suggest that the impact would be greater if philanthropists affected more lives now and created a legacy measured in changed lives and societal improvements, rather than the dollar amount of endowment funds that bear their names.
Here endeth the latest heresy. Your thoughts?
Copyright Alan Cantor 2012. All rights reserved.
3 Comments. Leave new
There is ample room in the philanthropic world for views of giving in perpetuity and for a finite period. The argument could be made that a well managed fund, while providing smaller levels of reliable support for an organization at first, in time could reach that “significant legacy” level of support beyond ten years. For those addressing societal needs that exist in perpetuity, ten years is a very short period of time.
I love this idea Alan. Leadership training is transformational, both for the graduates and the world. More than 20 years ago the Institute on Disability at UNH began its Leadership Series for parents of children with disabilities (the series has been expanded over the years to include individuals with disabilities and professionals participating in UNH’s LEND program). The impact of IOD’s Leadership Series in NH and beyond cannot be overstated. Graduates have brought about needed changes in our state’s schools and service systems. They have been elected to local school boards and the state legislature. Graduates are leaders on governing boards and advisory councils for organizations serving people with disabilities. They are the heart and soul of ABLE NH, a cross disability advocacy organization, fighting for full community inclusion of all NH citizens. An investment in leadership training is an investment in the future and a great legacy for the donor.
First, a reassurance to all that this Susan is not the Susan I reference in the post, though both are friends!
Thanks for your good words, Susan, and you give convincing testimony about the positive benefits of leadership training. In the case you mention, you’re absolutely right about the community impact.
Truth be told, I’ve seen some leadership programs that are not nearly as effective. As with all nonprofit sectors, there’s some good, there’s some bad, and a lot in the middle. The key in my mind is to approach permanent endowments with great skepticism. My big push is to encourage investment in people rather than in financial vehicles.
If we want to stop the devastation caused by AIDS, should we invest $100 million in an endowment that will pay out 5% a year, or should we throw all $100 million into working for cures, treatments, and education? Clearly, we’d want to do the latter. Similarly, should we pay for quality education now, or put the funds in an endowment, from which we pull out 5% a year for that purpose? Again — the key is to invest in people now so we can change lives now — and those people can change lives in the next generation.
This is not to say there is not a role for traditional endowments. But they should not be the default solution for every philanthropic initiative. Too often they are.
Thanks!