September 29, 2009 | Philanthropies need to stop focusing simply on giving away money and instead think about how to bring about change, says Mark Kramer, founder and managing director of FSG Social Impact Advisors and a senior fellow at the Kennedy School of Government at Harvard University. FSG Social Impact Advisors is a nonprofit consulting and research organization that works with various sectors to “accelerate the pace of social progress.”

Despite having the world’s largest nonprofit sector, America continues to have serious social problems. What’s needed, Kramer says, is a new approach he calls “catalytic philanthropy.”

Kramer spoke with Faith & Leadership about catalytic philanthropy, effective evaluation and the role that faith-based organizations can play in mobilizing action.

Q: Why aren’t nonprofit organizations more successful in effecting social change?

The nonprofit sector in the United States is vast -- certainly the largest in the world by far. People give three times as much per capita as any other place in the world. Charitable giving has increased more than 250 percent in the last 25 years in inflation-adjusted dollars. Yet it’s hard to see a lot of progress.

What I’ve come to believe is that the sector is filled with so many small organizations -- 90 percent have budgets of less than $500,000 and only 1 percent have budgets over $10 million -- but no one organization can solve major social issues.

But there is not a mechanism for collaboration among these nonprofits, and there are market forces working against collaboration. The whole approach to fundraising now discourages collaboration. To get funding each nonprofit has to say, “My approach is better than someone else’s approach.”

Q: You offer a different model that you call “catalytic philanthropy.” What is that?

The difference between thinking about giving away money and thinking about solving social problems has become more and more powerful to me.

I recently wrote a piece in the Stanford Social Innovation Review called “Catalytic Philanthropy.” We studied successful philanthropists and discovered four distinct practices.

First, successful funders haven’t waited for people to come to them. They take a personal responsibility -- they haven’t just delegated. They tend to first take responsibility for achieving results. They stopped thinking about what organization to support and started thinking about how to solve a specific problem.

They’ve also campaigned for change. They’ve assembled the pieces of a solution, which an individual nonprofit can’t do. There are so many issues where it’s not that we don’t know the solution. It’s not that we don’t know how to make a good school or how to do welfare-to-work training programs. The issue is: How do we make it happen? How do we get it to scale?

In order to address these issues, it’s important to mobilize different groups to solve social problems.

Third, they use a whole range of tools, beyond the nonprofit sector and giving away money. These tools include corporate resources, investment capital, litigation and lobbying.

The last piece is that they create actionable knowledge. They’ve got a target audience, they’ve got a clear sense of what they want the audience to do, and they use knowledge about the problem to motivate people to action.

One example is Jeff Skoll [first president of eBay Inc. and founder of the Skoll Foundation] producing the film “An Inconvenient Truth.” He got information to the public that’s highly effective.

Q: You’ve talked a lot about donors. What about the folks on the other side, who are trying to get money for projects?

All of these four tools are things you can do whatever side you’re on.

We’ve seen a disappointment set in with major donors. They’ve been giving generously for years, and they don’t see a change. And they get burned out.

The trick is to give your donors a very concrete sense of what has been achieved. Are you really bringing about change on an issue -- lasting change? The more you can engage the donors, using more than just their checkbook, and make them aware of the issues, really engage them in a campaign for change, convey actionable knowledge to them, the more the contributions will follow.

Q: How do faith-based organizations fit into this model?

Religious organizations are very, very well-situated to use two of these tools. Mobilizing a campaign for change is something they are in a position to do. They have the trust and credibility -- not like a corporation or even a nonprofit.

They obviously have a tremendous network of supporters, members whom they can reach and influence.

The other way they can be very, very powerful is actionable knowledge. They can convey information that can help people change behavior.

For us, effective philanthropy is always about more than just the money. Because money doesn’t solve social problems. I think faith-based organizations have tools they can use to effect change.

Really their challenge is focus -- you can’t do it with six or seven different issues. You have to have one or two. It doesn’t mean you can’t support projects in all different areas, but the effort you put into one issue has to be on a completely different level.

Q: How do you show progress when, as you say, it’s hard for one organization to affect large-scale change?