Strategic Assessment of Philanthropy: Lessons for the Joyful Giver
All major faith traditions, ethical systems, and moral codes emphasize the importance of charitable giving. Saint Paul puts it succinctly: “He which soweth sparingly shall reap also sparingly; and he which soweth bountifully shall reap also bountifully.” The stoic philosopher and Roman statesman Seneca offers a complimentary view: “We should give as we would receive, cheerfully, quickly, and without hesitation; for there is no grace in a benefit that sticks to the fingers.”1
The highest goal then is to give cheerfully and without hesitation. However, the modern cynic, and probably you and I, for justifiably prudent reasons, would counter that one must also give responsibly. The joy of giving is easily crushed when donations produce little change or, worse, are wasted or stolen. By the same logic, increasing your philanthropic allocation will not proportionally increase your joy. Developing an informed approach is crucial.
Increasing Joy Without Decreasing Prudence
If giving should be joyful, then how can one increase joy without sacrificing the crucial role of diligence in order to make prudent and informed decisions? Looking through the lens of process can help diagnose and understand the overall ecosystem of a family office’s philanthropic work. A family office philanthropy team can enter the space with the best of intentions only to emerge jaded by bad faith actors and overly complicated structures. The result is that they become disenchanted with the potentially rejuvenating and rewarding work of giving, which then reverberates throughout the family office. In this scenario, rather than a source of joy, philanthropy becomes a burden, or just another way to build a tax efficient balance sheet. The fault doesn’t lie with any individual or organization, but rather emerges from a locus of forces and constraints that make it difficult to do philanthropy well.
The most fundamental force is simply the scale of the problem itself. An unintended consequence of being a global citizen is the inheritance and enormity of global problems. The scale of the problems are often so great that no individual or group of philanthropists alone can solve it. Against such large-scale problems, even large acts of giving appear like a drop in the bucket. But despite the enormity of the problems, and complexity of the system, one can still do philanthropy well. Doing so requires careful design and the ability to mediate a healthy cynicism with a sincere desire to improve the world in a meaningful way.
It’s for these reasons that family offices must proceed with the utmost care and caution — but proceed all the same. The rise of new qualitative metrics like Environmental, Social, and Governance (ESG) and the broader category of “Social Impact” evince the tidal shifts that are underway in public and private markets.2 The rise of impact investing is in part born out of the realization that the private sector has an immense influence over a host of non-financial outcomes.3
Despite these commercial trends, there will always be a need for philanthropic citizens; if for no other reason that not every worthy cause can (or should) be profitable. The division between philanthropy and ‘for-profit’ impact investment is complex and merits further analysis, but for our purposes it’s important to simply note that there are some endeavors that produce desirable social goods but will never themselves be profitable4.
Measuring Giving Practice
To help your assessment of your own family office’s approach to philanthropy, we offer four assessment ‘metrics’ for consideration. These metrics are qualitative in nature and are meant to inspire critical thinking and analysis. Alongside these metrics is a heuristic that offers one way to think about portfolio construction. The most important take away comes from the ancients themselves: giving should be joyful. If you are happy and content with your giving practices, then continue in your path as a joyful giver.
1. Fluidity
The concept of fluidity assesses the overall speed of your giving. How easy is it for you to give? How long does it take you to get comfortable with a new organization? The counterforce to fluidity is drag. These are not moral terms; speed is not a universal good and drag is not a universal bad. Philanthropy is much harder to analyze than investing because the return on philanthropic giving is social, not financial. The nation’s wealthiest individuals have voiced this sentiment. Elon Musk, on January 7, 2021, tweeted that finding impactful ways to donate money is “way harder than it seems.” While Musk is at the beginning of his philanthropic journey, the Bill and Melinda Gates Foundation has 1,600 employees and an endowed trust of $49.8 billion dollars. Even with a large staff and annual contributions from Warren Buffet, the foundation supported grantees with only $5.1 billion in 2019.5 Based on the Gates Foundation public disclosures, the organization could easily sustain an annual giving budget of about $7.5 billion and still remain within their stated goals and objectives. The need and the resources exist, but the processes and systems increase the drag and slow down the overall impact.
From a macro perspective, the problem of an illiquid philanthropic ecosystem is evinced through the capital held up in donor advised funds (DAF).6 In 2018 total contributions to DAFs grew by 20% to $37.12 billion. Total charitable assets in DAFs were $121.42 billion in 2018. Despite the increase in funds, the aggregate grant payout rate remains around 20%. While the DAF payout rate is higher than what private foundations are required to give, there is a tremendous amount of capital stuck in DAFs. Unlike an institution like a foundation, the purpose of a DAF is meant to streamline the giving process between making the gift and deploying the gift. Part of the disjointedness emerges because the benefit to giving to a DAF is secured once the gift is made, not when the gift is deployed. In other words, the incentives to make the gift are higher than the incentives to deploy the gift. If DAFs only deployed 20% of their assets in 2018, does that mean that there were only $24.28 billion dollars of worthy organizations? Given the scale of the national and global problems and the amount of human and ecological suffering, it would appear that the problem is not the lack of need, but rather the lack of fluidity.
Your success as a giver is secured through trust and knowledge, both of which require time and patience. As a general principle, the more you trust the individual or organization, and the more you know the details of their organization, as well as their mission, the more quickly and fluidly your giving will be. The conclusion of this paper outlines a few practical strategies that can help increase the overall fluidity of your philanthropic practices without losing the important and necessary work of diligence and building an informed understanding. As a family office philanthropist, reflecting on the fluidity of your own giving practices may help you discover new ways to optimize your overall practice.
2. Transparency
There are two lenses through which one can analyze transparency: authenticity and integrity. Authenticity captures the extent to which claims line up with actions and intentions. Integrity speaks to how the practices of the organization fit within a larger social and economic milieu.
Authenticity is the surest way to establish trust in an organization. Do they do what they say and are their operations open for careful diligence? In extreme cases, inauthentic organizations may be acting fraudulently, however a more common occurrence is simply the marketing claims of the organization not living up to the experience and practices on the ground. Because there is such a strong connection between the story of an organization and their ability to attract donors, sometimes the claims of the organization outgrow the operations. Stakeholder analysis as well as program and financial analysis and track record are critical factors for any analyst here.
The concept of integrity, in this instance, refers to the human, social, and economic stability of the mission of the organization. A clear example of an unstainable practice is found in the practice of donating basic supplies – like clothes – to poor nations. In the case of Haiti, donated T-shirts end up being sold for pennies on public markets. The result disrupts the local economy, puts skilled craftsman like tailors out of work, erodes community-based knowledge, and creates a dependency between the developed and undeveloped world that cannot be easily undone.7
There’s no easy way to analyze the sustainability of an organization but empowering your team to investigate the secondary and tertiary consequences of an organization, with the same level of rigor that they bring to private investment opportunities, and working with experts in the space will help build a more sound and thoughtful overall strategy and mission to your philanthropic activity. Becoming a subject-matter expert in a specific region or theme allows you and your team to build a specific knowledge base in order to understand the major players and the best and most effective strategies.
3. Efficiency and Effectiveness
While the concept of fluidity and drag represent one way to understand efficiency, the concept broadly speaks to all the forces that either impede the flow of capital or dilute the use of capital. Drag is both quantitative and qualitative. There are ways to measure the efficiency of the gift, but one must also reflect on the other forces that are causing one to “drag their feet.” Is the gift outside of your comfort zone, do you have reservations about the organization, do you question the larger impact and purpose of the gift, are there competing interests that make an equally strong case for another kind of organization?
As was the case with DAFs, analyzing the relationship between the dollars committed vs the dollars deployed is one way to measure overall portfolio efficiency. Another equally important metric is the measurement of operational overhead vs deployed capital. It’s not always the case that low overhead costs mean well managed money. More important is the organizations justification and analysis of their own overhead costs and how those line up with your own ideas. Robust organizations that are looking to build a charitable legacy need to create worthy incentive structures in order to attract and retain top talent. Similar to building a family office team, finding the perfect balance between operational efficiency and rewarding incentives is an ever-evolving dynamic. When it comes to philanthropic activity, the best place to begin is simply with validating the claims of the organization itself. For example, “Food for the Poor”, got into trouble because its marketing claims used cash and noncash donations to appear much more efficient than it actually was. Eventually the state of California issued a cease-and-desist order to “Food for the Poor” and this is a cautionary tale in the importance of careful diligence8. Although your gifts will not be measured through an ROI, it is vital to work with experienced professionals that can help identify robust, authentic, and well-designed organizations that will help you achieve the social objectives of your philanthropic gifts. Those that you empower to help steward your capital toward these ends must be as diligent and rigorous as the investment team that structures and negotiates private investment or public securities.
4. Joy
It’s difficult to write about joy in a rigorous way, but it may be the most foundational and important ‘metric’ on this list. Giving should be joyful. When organizations you’ve given to in the past call you, or your philanthropy team reaches out to have a meeting, do you feel joy or dread or nothing at all? If the feelings are negative, then it may be time to undergo a deeper review of your overall strategy and goals. If you already experience joy, then how can you continue to foster and grow that experience for yourself, your team, and your peers? One important relationship is the connection between joy and knowledge. By joy, we’re not referring to the superficial rush one experiences when one makes a large gift. The kind of joy outlined by St Paul and Seneca is sustainable and grounded in knowledge. Making informed choices and knowing that your actions are making a real and significant impact in the world create a foundation for becoming a joyful giver.
Putting These Metrics into Practice
Hopefully these four metrics help put your own giving practices into perspective. If that’s the case, then there are some easy-to-implement strategies to improve your giving practice. First: Curate your portfolio. Pick a few organizations to get seriously involved with. Organizing around a specific theme is a great place to start. Second: Become a subject matter expert. Build a knowledge base around the theme, expert writers and thinkers, and major organizations and efforts. Third: Identify opportunities for outsized impact. Large gifts can seem small when given to massive foundations; alternatively, local organizations or more niche strategies may allow you to make a massive difference within a particular area. Extra diligence is required when working with newer organizations, but the opportunity to grow alongside an organization while it builds out its capabilities Finally: Become engaged with the community. Get to know the groups that you’re most active with and look for opportunities to become a board member or advisor.
While these strategies offer a framework for deploying enlightened capital, you can supplement this strategy with a separate pool of funds for more spontaneous gifts, akin to a pipeline for future opportunities and research. From a risk management perspective, 80% of your allocation may be dedicate to your core area, while 20% you keep on reserve for new opportunities.
We hope by putting the above strategies in place it will help you to add more joy to your giving!
Notes
- For more of Seneca’s writings on charity, see On Benefits, perhaps the first extended work on the nature, purpose, and value of charity.
- For our thoughts on ESG and Impact Investing, see our earlier publication “Impact Investing: What Family Offices Must Consider.” https://tfoa.info/wp-content/uploads/2021/01/Whitepaper-2.0-Impact-Investing.pdf
- According to Charity Navigator, philanthropic dollars represent only 2% of GDP. While that 2% can make a tremendous impact, they must be managed and deployed with utmost care. https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=42
- Education is one example: the value of an education is unmistakable, but the gains themselves may not be realized for years or for generations. Hospitals and healthcare are also excellent examples. Hospitals in the 19 th century were largely funded through religious organizations and churches. Their existence was wholly dependent on philanthropic commitments. Today we view hospitals and healthcare as an essential part of our society, not merely as an act of charity.
- Gates Foundation Fact Sheet.
- See Mark Schoeff Jr. “A Better Way of Giving,” Investment News , 22 March 2020. and the National Philanthropic Trust’s 2018 DAF Report:
- Patrick Moynihan has written about this exact phenomenon, which he witnessed first-hand during his time with The Haitian Project.
- Martin Levine, NPQ: Nonprofit Quarterly , “Food for the Poor: Questionable Tactics Threaten its Credibility and Reputation. 6 June 2018
Frequently Asked Questions
What are the four metrics for assessing family office philanthropy?
TFOA offers four judgment-based measures for family office philanthropy: fluidity, transparency, efficiency and effectiveness, and joy. These are meant to spark careful thinking about a giving program rather than serve as exact numbers, with the guiding idea, drawn from the ancients, that giving should ultimately be joyful.
What does fluidity mean in family office philanthropy?
Fluidity measures the overall speed of giving, including how easily a family office can give and how long it takes to get comfortable with a new organization, with its opposite force being drag. Neither speed nor drag is good or bad on its own. More fluidity comes from trust and knowledge, so the more a giver knows and trusts a group, the faster and more confidently they can give.
Why is so much philanthropic capital stuck in donor advised funds?
Much giving money sits stuck in donor advised funds because the tax break comes when the gift is made, not when the money is actually used, which weakens the push to give it out. In 2018, contributions to DAFs grew 20% to $37.12 billion and total charitable DAF assets reached $121.42 billion, yet the overall payout rate stayed around only 20%.
How can a family office assess the transparency of a charitable organization?
A family office can judge transparency through two lenses: authenticity and integrity. Authenticity asks whether an organization's claims match its actions and whether it is open to scrutiny. Integrity refers to whether its mission is sustainable for people, society, and the economy, including the unintended knock-on effects of its work.
What portfolio approach does TFOA suggest for family office philanthropy?
TFOA suggests a simple risk rule where roughly 80% of giving goes to a chosen core area of focus and 20% is kept in reserve for new, more spontaneous opportunities and research. This pairs with steps to shape the portfolio, become an expert on the subject, find chances for outsized impact, and engage with the community.
Why is giving harder to analyze than investing for a family office?
Giving is harder to judge than investing because the payoff is social rather than financial, so there is no return on investment to measure against. The article notes the size of global problems can make even big gifts feel like a drop in the bucket, and points to the Gates Foundation, which had 1,600 employees and a $49.8 billion endowed trust yet gave only $5.1 billion in 2019.
Can donating physical goods to poor nations cause harm?
Yes, donating basic goods like clothing to poor nations can do harm by disrupting local economies. In Haiti, donated T-shirts ended up sold for pennies on public markets, putting skilled workers like tailors out of work, wiping out community know-how, and creating a dependence between developed and undeveloped nations that is hard to undo.
Why is joy considered the most important metric in family office philanthropy?
Joy is seen as the most basic measure because, as Saint Paul and Seneca taught, giving should be cheerful, sustainable, and grounded in knowledge rather than the quick thrill of a big gift. If reaching out to past grantees brings dread or indifference instead of joy, TFOA suggests it may be time for a deeper look at the family office's overall giving strategy and goals.
About the Authors
Marc J. Sharpe is the founder and Chairman of TFOA, an organization formed in 2007 to provide a forum for education and networking and to serve as a resource for single family office principals and professionals to share ideas and best practices, pool buying power, leverage talent and conduct due diligence. Mr. Sharpe also teaches an MBA class on “The Entrepreneurial Family Office” as an Adjunct Professor at SMU Cox School of Business. Contact: marc@tfoa.me
Patrick Moynihan is a leader in the nonprofit space with experience as an educator, a community builder, who spent the past 25 years successfully reviving and then expanding an educational institution, in Haiti, one of the Western Hemisphere’s poorest nations. Patrick has seen the best and the worst in the global philanthropy and he launched Moynihan Philanthropic Advisors (MPA) in 2020 to share his knowledge and help funders gain the confidence to invest their philanthropic dollars more quickly and accurately, increasing its impact. Patrick graduated magna cum laude from Brown University and earned a Master of Arts Degree with distinction in Religious Studies from Providence College. Ordained a permanent deacon for the Roman Catholic Diocese of Rockford (IL) in 2001, he is currently assigned to St. Sebastian, Sebastian, FL and lives with his wife, Christina, in Vero Beach, FL.
Seth Morton, Ph.D. has served family offices in areas of investment diligence, execution, and management; governance; research; communications; and multi-generational, sustainable legacy planning. He seeks to improve team performance by cultivating learning-focused and communications-driven processes that deliver exceptional results. He and his family are currently based in Texas.
About TFOA
The Family Office Association (“TFOA”) is a global peer network that serves as the world’s leading single family office community. Our group is for education, networking, selective co-investment, and a resource for single family offices to share ideas, deal flow and best practices. Members are not actively marketing products or services to other members and no contact information or email lists will ever be shared. Since our founding in 2007, TFOA has led the global single family office community by delivering world-class educational content, unique networking opportunities, and exceptional thought leadership to our highly curated network of the world’s largest and wealthiest families: www.tfoa.info
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The Family Office Association (“TFOA”) is a peer network of single family offices. Our community is intended to provide members with educational information and a forum in which to exchange information of mutual interest. TFOA does not participate in the offer, sale or distribution of any securities nor does it provide investment advice. Further, TFOA does not provide tax, legal or financial advice. Materials distributed by TFOA are provided for informational purposes only and shall not be construed to be a recommendation to buy or sell securities or a recommendation to retain the services of any investment adviser or other professional adviser. The identification or listing of products, services, links, or other information does not constitute or imply any warranty, endorsement, guaranty, sponsorship, affiliation, or recommendation by TFOA. Any investment decisions you may make based on any information provided by TFOA is your sole responsibility. The TFOA logo and all related product and service names, designs, and slogans are the trademarks or service marks of The Family Office Association. All other product and service marks on materials provided by TFOA are the trademarks of their respective owners. All of the intellectual property rights of TFOA or its contributors remain the property of TFOA or such contributor, as the case may be, such rights may be protected by United States and international laws and none of such rights are transferred to you as a result of such material appearing on the TFOA web site. The information presented by TFOA has been obtained by TFOA from sources it believes are reliable. However, TFOA does not guarantee the accuracy or completeness of any such information. All such information has been prepared and provided solely for general informational purposes and is not intended as user specific advice.
Frequently Asked Questions
How do family offices approach philanthropy?
Family offices approach philanthropy through a range of vehicles including private foundations, donor-advised funds (DAFs), charitable remainder trusts, and direct grants. The choice depends on the family's desire for control and anonymity, the scale of giving, and whether they want the philanthropic entity to be a lasting institution or a flexible tool.
What is the difference between a private foundation and a donor-advised fund for family philanthropy?
A private foundation is an independent legal entity controlled entirely by the family, with the ability to make grants, hire staff, and shape its own programs — but subject to 5% annual distribution requirements, excise taxes, and extensive reporting. A donor-advised fund offers simplicity and anonymity: the family contributes assets, takes an immediate tax deduction, and recommends grants over time without the administrative burden of a foundation.
How do family offices integrate philanthropy with investment strategy?
The most sophisticated integration is through mission-related investing (MRI) and program-related investing (PRI), where the family's investment portfolio is aligned with its philanthropic goals. A family focused on climate, for example, might screen out fossil fuel companies from its investment portfolio, invest in climate technology, and direct philanthropic capital to policy and advocacy organizations.
What role does next-generation engagement play in family philanthropy?
Philanthropy is one of the most effective tools for engaging the next generation in the family office's mission. Giving younger family members meaningful roles in grant-making decisions — including their own grant budgets — teaches financial decision-making, builds values alignment, and creates shared purpose across generations.
