Posted , by Wendy McGrady, Executive Vice President. Topic: Crisis Fundraising, Fundraising, Funds and Funders, High-Net-Worth Individuals, Major Gifts Programs.

Trust-Based Philanthropy in Action

By Wendy McGrady, Executive Vice President

Much has already been written in response to MacKenzie Scott’s December distribution of over $4 billion in unrestricted gifts to 384 organizations across the country. Rightfully so — such incredible generosity should be covered and celebrated! Her significant, unexpected gifts will certainly be transformational to the nonprofit recipients and the clients they serve. We were particularly excited to see a number of current and former clients among the recipients of these gifts.

What I found particularly intriguing was Ms. Scott’s philosophy, approach, and process for making her gifts. A statement, released as the gifts were made, said she was motivated by the incredible need the pandemic has created and was inspired by others trying to address it. She recruited a team of advisors to help her target her 2020 giving to organizations assisting people suffering the economic effects of the crisis. They used a data driven approach and looked for organizations with strong leaders and results. There was no application process. In the end, they selected nonprofits, big and small, addressing everything from immediate basic needs to  long-term systematic inequities highlighted by the crisis.

The part of the process that stood out to me was that Ms. Scott and her advisors did an incredible due diligence — researching almost 6,500 organizations. Once they selected the 384 recipients, they felt were best prepared to use Ms. Scott’s gifts to achieve their missions, the gifts were made with no restrictions and no strings attached.

In her own words, Ms. Scott said, “Because our research is data driven and rigorous, our giving process can be human and soft.  Not only are nonprofits chronically underfunded they are chronically diverted from their work by fundraising, and by burdensome, reporting requirements that donors often place on them.”

What is Trust-Based Philanthropy?

In summary, with her gifts and her process, Ms. Scott demonstrated her trust in the nonprofits she selected. She understood they are best equipped to do the work they set out to do when properly funded and not spending time applying for and reporting on restricted grants.
The number of donors practicing Trust-Based Philanthropy is still relatively small.  The concept of choosing nonprofit partners best equipped to help a foundation achieve goals, and making multi-year, unrestricted gifts in support of the work still has a long way to go to be widely recognized as best practice ( I would love to see more institutional funders intentionally and rigorously choosing their partners, allowing those nonprofits to determine the best use of the funds in support of their mission, and eliminating days spent applying for and reporting to the funder over the course of the grant.

Last year, in the face of unprecedented challenges, many institutional funders unrestricted their previously restricted grants. This allowed nonprofits suffering great decreases in contributed revenue and, in many cases earned revenue as well, funding to use where they needed it most.  One might suggest this was a step toward trust-based philanthropy. Wouldn’t it be transformative to the nonprofit sector if even a portion of those funders decided to continue with that strategy?  It would require more work on funders up front, but a true partnership would achieve greater results in the long run. In addition to results through their nonprofit partners’ missions, institutional funders would also create results like improved communication, a rebalancing of systemic power inequity, increased transparency and efficiency.

Perhaps Ms. Scott’s giving process will inspire other funders — both individual and institutional — to try her approach.  I encourage you, foundation staff, board members and volunteer leaders, to learn more about trust-based philanthropy. I know nonprofits would welcome the opportunity to dialogue, brainstorm and foster a giving relationship based on trust and transparency.

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