How does a philanthropic organisation gain clarity and alignment to operate most effectively and affect positive social change?

This article explores four elements that enhance a philanthropic organisation’s ability to affect substantial social change. These elements provide the map and compass for a philanthropist, enhancing organisational effectiveness and the ability to achieve mission. They are applicable to new and established organisations alike, helping them to clarify who they are, what they want to see changed and how they are going to do it.

Last year, SVA Consulting facilitated using these elements to support the Paul Ramsay Foundation, Australia’s largest private foundation, to bring crucial insight to the type of organisation it wanted to become.

The article will:

• Outline the four elements
• Provide guidance for new and existing philanthropic organisations
• Demonstrate how these elements were applied to the Paul Ramsay Foundation.

The four elements

All philanthropic organisations want to improve and maximise their impact, however investing in social change is extremely challenging. It’s easy to say ‘do better’, ‘be smarter’ or ‘be more strategic’, but where do you start? Whether establishing a new foundation or wanting to reassess a long-standing organisation, what are the ‘imperatives’ that require true clarity for successful philanthropy?

Great philanthropy requires that your philanthropic organisation has clarity around four elements:

• Philosophy – why do you invest?
• Focus (and purpose) – what do you want to see changed?
• Strategy and implementation – how are you going to do it?
• Accountability – how well are you performing?

If a philanthropic organisation does not have clarity around these elements, it will underperform resulting in diminished impact. This can manifest through mission creep, inappropriate investments and a lack of accountability or transparency.

All major philanthropic funders should be informed by this approach, as it enhances outcomes and the overall impact for society. The four elements are necessary but not exhaustive. Nor are they a process to ‘go through’ or a checklist; they provide a lens through which philanthropic organisations can view themselves to better understand their DNA and explore how they can best maximise their impact.

Gaining clarity around these elements requires open and exploratory conversations to articulate an organisation’s approach to philanthropy. All of the elements should be explored, defined and then revisited periodically as internal and external environments change.

Paul Ramsay Foundation

When entrepreneur and founder of Australia’s largest private hospital company, Paul Ramsay AO died in 2014, he bequeathed approximately $3 billion to the Paul Ramsay Foundation. To help establish the Foundation, its trustees engaged SVA Consulting.

“This was a once-in-a-lifetime opportunity … to shape the future of a philanthropic organisation with immense potential.”

Ramsay had not left a large amount of formal guidance around the purpose of the Foundation, so SVA facilitated a process of searching discussions amongst the trustees, management and some trusted external advisors to articulate the four elements.

By the end of the project, everyone working with the Foundation was aligned around a common philosophy and focus, supported by the first iteration of a 3-year strategy. All of the elements will continue to be iterated as they test their approach and learn, refining their understanding of what they want to see changed and the unique role they can play.

As Simon Freeman, CEO of the Paul Ramsay Foundation says “While it was tempting simply to start funding worthy causes, everyone agreed that it was really important to first clearly articulate the type of organisation we wanted to be.”

“This was a once-in-a-lifetime opportunity for everyone involved to shape the future of a philanthropic organisation with immense potential. Gaining clarity around our philosophy and focus was needed before we could develop our strategy and accountability mechanisms.”

Philosophy

Who are you: why do you give and what kind of philanthropic investor do you want to be?

This isn’t navel gazing; these are vital questions. The answers form the bedrock of everything a philanthropic organisation does. Giving (and how you do it) does not occur in isolation of your organisational values and belief system. The philosophy sketches the boundaries, ring-fencing your unique philanthropy. Of the four elements, philosophy is the least likely to change.

It is influenced by two pieces:

1. The why: Your history, values and beliefs

Why are you here? Your philosophy is influenced by the organisation’s history and the original donor(s), including:

• What are your beliefs and values? Do you have a passion for collaboration and innovation? Do you have strong religious affiliations that might influence your approach?
• What was and is the source of funds available for philanthropy?
• If a corpus was established through a bequest, how influential is the life and motives of the original donor? What guidance was given or is it up to the trustees?

2. The how: Your style

You also need clarity around your ‘style’ of philanthropy, as the style that works for one organisation will be anathema to another.

Some of this will be influenced by what change you hope to see (your focus) and the approaches you choose to employ, as certain styles of philanthropy might increase your impact for different issues or be more suitable for certain investments. Nevertheless, it is important to articulate some of this upfront:

• Do you want a public profile, or do you prefer to work quietly in the background?
• What is your risk appetite? Do you want to fund ‘tried and true’ programs or do you have the appetite for yet-to-be-proven approaches?
• What is your preferred investment horizon? Do you hope to operate in perpetuity or do you want to set a time limit?

It is also important to understand the type of role you want to play. An organisation that seeks to be a catalyst for social change, bringing organisations together around a specific issue, will have a very different philosophy to one that is best suited to a more passive and supportive mode.

The result of these reflections may be articulated in a charter, capturing the history of your organisation and what has shaped your values and beliefs. It could also be reflected in an overall guiding purpose, vision or dream. While most philanthropic organisations have articulated their vision, many organisations haven’t considered the broader elements of their philosophy or acknowledge that it is largely undocumented. That might work for now, but what about in 10, 20 or 50 years?

A major benefit of obtaining clarity around your philosophy is creating alignment across the organisation. This alignment can reduce the likelihood of mission-creep and improve your capabilities through attracting the best ‘fit’ in terms of: management, governance, other donors, investees and partners.

For corporates, such clarity also ensures that shareholders understand why the organisation engages in philanthropy.

“It ensured that from the day of ‘going live’ and initiating its first grant there was clarity about what it wanted to be.”

As a new organisation, it was particularly important for the Paul Ramsay Foundation to explore these factors and articulate its philosophy. These were the questions that framed the first discussions that SVA facilitated with the Foundation, establishing the direction for the rest of the journey.

Much of its philosophy was influenced by Paul Ramsay himself — who he was, what he believed and what he hoped to achieve through the Foundation. The organisation also looked to the history, values and guiding purposes of some of the largest and most effective philanthropic organisations domestically and abroad. This allowed everyone to test their thinking, highlighting what the Foundation could adopt and adapt, and how it was unique.

It ensured that from the day of ‘going live’ and initiating its first grant there was clarity about what it wanted to be.

The Foundation philosophy was articulated in three key ways:

• Vision: to empower people to enable lasting change
• Charter, outlining guiding principles of learning, transparency, growth, governance and innovation
• Documentation of its history and a commitment to document key moments in the future.

Focus

Put simply: ‘what do you hope to see change?’, or what do you hope to influence, improve, enable or reduce? An organisation must be able to articulate what it is focused on and why, as this establishes another level of clarity and increases alignment within and without.

This is a key decision point that is substantially influenced by your philosophy. While many organisations do this intuitively, it is important to articulate why your organisation is investing in a particular area. Of all the issues in the world, why are you focused on bowel cancer, homelessness or climate change? Is this focus justified and enhanced by your philosophy?

Another step can be exploring how specific you want to be in your focus.

For some organisations, the focus is already crystal clear as it is explicitly articulated in a constitution, bequest or other instrument. For those without this prescription, one starting point is to establish some boundaries. Are there areas of focus (be they sectors, geographies or cohorts) that are completely ‘off the table’ as they don’t align with your philosophy? Are there some areas that simply must be part of your focus, because they are so deeply connected with your philosophy? Documenting your rationale behind these decisions is critical in contributing to the ongoing development of your philosophy and establishing greater alignment.

Another step can be exploring how specific you want to be in your focus. Will you limit yourself to a particular geography, cohort or sector? Will you be a generalist or specialist in certain issues? See Figure 2.

Once the level of specificity has been decided, an organisation must then understand the specific issue(s) it is responding to, the outcomes it seeks to influence and the impact it hopes to achieve. This includes developing the theory of change (or program logic statement), complemented with research, evidence-gathering, due diligence and engagement with the sector and potential partners.

To support organisations through this process, SVA typically uses the Golden Thread methodology, using the size of an issue and the organisation’s unique ability to influence it to identify priorities for focus.

This was a highly iterative process, and contributed to the crafting of the Foundation’s mission…

With the Paul Ramsay Foundation, individual interviews with trustees and management revealed where consensus lay before everyone came together to discuss the focus. Based on its philosophy, they explored whether some areas were simply ‘off the table’, while others (e.g. health) were clearly more closely connected to who the Foundation is.

This was a highly iterative process, and contributed to the crafting of the Foundation’s mission:

The Paul Ramsay Foundation is committed to identifying the root causes of disadvantage and implementing strategic solutions to empower our communities. We will look to forge long term, collaborative partnerships with our peers, and fund scalable projects to grow capacity and enable lasting change.

Within this, the Foundation will start with a focus on health, education and disadvantage in Australia. It is reviewing specific issues such as mental health and drugs and alcohol to develop an evidence base and determine what it could fund and who it should partner with. This review will be ongoing and develop in sophistication over time. This approach strongly aligns with its guiding principles and desire to learn and be deliberate.

Strategy and implementation

What goals should you strive for to enhance your ability to achieve impact and what do you need to realise them?

Developing and executing SCORE (specific, consistent, observable, realistic and exciting) goals will support focus and alignment, ensuring your organisation allocates resources more effectively to achieve the impact that matters. Typically, philanthropic organisations will design goals that fall around three themes:

• Impact – what impact do you hope to create?
• Organisational effectiveness – what does your organisation need in order to achieve its mission, including capabilities, partnerships and structure?
• Corpus and fundraising – what funding do you need?

Based on the goals, an organisation can then articulate what is required to achieve them, including what initiatives are needed to succeed.

As a philanthropic organisation, you must ensure you have (or have access to) the right capabilities, people and information to:

• understand the issue you are addressing, its drivers and potential ‘solutions’
• perform environmental scans and due diligence of potential investments
• support and monitor your investees
• measure and evaluate your impact (see Accountability).

The Paul Ramsay Foundation required a strategy that would lay the foundations, and allow the organisation to learn, grow and eventually become what they want to be. This is captured in how they describe their approach: “Strategic in our thinking and practical in our solutions”.

“This will allow us to refine our strategy, become more sophisticated and articulate increasingly specific goals.”

While the full strategic plan isn’t yet public, the Charter reflects some of the Foundation’s goals around developing a strong knowledge base, forging strong partnerships and establishing a culture of transparency, learning and innovation. Supporting this will be a ramp up of its investments over time, developing its theory of change, growing its pipeline and portfolio, and learning what works and what works for them.

As Simon Freeman says, “We acknowledge that we are only taking the first steps on our journey. We have a clear view of what we need to achieve over the next three to five years, but must remain agile, learn as we go and change our approach where necessary. This will allow us to refine our strategy, become more sophisticated and articulate increasingly specific goals”.

Accountability

How will you keep yourself accountable, and to what? Many organisations consider accountability against their strategic plan, but it is important to consider this more broadly.

A philanthropic organisation must remain accountable to:

1. Its philosophy, focus and strategy
2. The public and the sector

A key factor alongside this is the importance of transparency in everything that you do.

1. It’s philosophy, focus and strategy

How will you ensure that your organisation, its activities and investments align with your philosophy, focus and strategy? How will you ensure that you are creating impact?

This is where a robust approach to measurement and evaluation is vital. Greater social impact relies on managing to, and funding to, outcomes. This requires a clear articulation of the outcomes you seek, useful indicators to monitor and effective practices for data collection, analysis, reporting and decision-making. Philanthropic organisations should be able to articulate how a particular investment aligns with its desired impact, and monitor its performance accordingly. This will require a level of collaboration with investees, and should be scaled to fit their size and sophistication.

Ensuring that you are on track to achieve your strategic and operational objectives is the role of classic management-level and governance-level performance monitoring against a plan. The key is to design clear and achievable KPIs, with targets, that are monitored and act as a catalyst for action.

From here, an organisation must embed a cycle of continuous improvement, keeping itself accountable to the strategy while being prepared to adapt it when necessary.

2. The public and the sector

The next evolution of accountability is external transparency. There is already an increasing focus in this realm, both with the role of the Australian Charities and Not-for-profits Commission (ACNC) and the increasing awareness globally of the power of transparency to support the sector’s development.

The social sector would benefit from philanthropic organisations living in ‘glass houses’, transparent in who they are, what they are trying to achieve and whether they are being successful. This approach is being adopted overseas and is important for disseminating what works, sharing good practice and enabling greater collaboration and cooperation in the sector.

It is also particularly important in the context of failure. Sharing information and knowledge about failures, and what they can teach us, creates another channel of value creation for philanthropists. Sharing mistakes allows others to avoid them and help channel funding and effort towards other opportunities.

“Our size alone requires us to be accountable.”

As the Paul Ramsay Foundation continues to develop and refine its strategy, the accountability mechanisms are also in their first iterations. Internal accountability is the primary focus before it turns its mind to how it can best remain accountable to the public and sector.

The Paul Ramsay Foundation has a strong commitment to transparency, captured in its Charter:

“We want to be clear, open and honest about what we know and don’t know. We want to learn from our errors and share that learning.”

It augers well that the largest Australian private philanthropic organisation is leading by example while humbly acknowledging that it is on a learning journey of its own. This will evolve over time, but should involve sharing the knowledge base it develops, why it succeeds and, most importantly, why it fails.

“Our size alone requires us to be accountable”, says Freeman. “We hope to become increasingly transparent, as we believe this will help us become a better organisation and achieve our mission. If this also helps others on their journey, then that’s another fantastic outcome”.

Supporting this, the Foundation seeks to develop a robust measurement and evaluation framework, enabling it to track the impact their partners create and whether they are achieving their mission. This will take time to design and evolve but, in line with their commitment to transparency, this is something they eventually hope to share with the sector.

Conclusion

Philanthropy is a serious endeavour that should be inspiring and engaging. It can be deeply personal, but has a weighty responsibility to be performed in a way that maximises social impact. Clarity and alignment around philosophy, focus, strategy and accountability are necessary enablers for effective philanthropy. They act as the map and compass for a philanthropist, enhancing organisational effectiveness and the ability to achieve mission.

“… the end product spoke far more about the sort of organisation we wanted to become, rather than the specifics of what we would fund.”

For the Paul Ramsay Foundation, gaining clarity and alignment on these four elements was extremely valuable.

“Our initial vision for the process was that we would end up with a very defined set of outcomes, which would set out exactly what the Foundation would do and how,” says Freeman. “As it turned out, the end product spoke far more about the sort of organisation we wanted to become, rather than the specifics of what we would fund. But we believe that that outcome is far more valuable in the long term.”