Doug Balfour

NexThought Monday: What business can teach philanthropists

Traditionally, most people think of business and philanthropy as separate worlds. However, there’s a shift under way that’s bringing those two worlds together more and more. We can certainly see that phenomena in the emerging interest in social enterprise, impact investing and corporate social responsibility programs. Each sector has valuable lessons that the other could apply. Since I sit at the quirky intersection of a for-profit business focused on philanthropic consulting, I feel that there are unique insights I’ve gained.

My company, Geneva Global, was founded by an international investment group which was looking for professional philanthropic advice that met the investment banking standards they were accustomed to receiving. When they didn’t find the level of transparency and measurement they were seeking – not to mention the investment mindset in which they wanted to approach their philanthropic work – they established Geneva Global in 1999. In 2008, I acquired Geneva Global, but our thinking and approach has stayed true to our origins. Given our DNA, I believe there are three business traits that would make philanthropists more effective.

First, measure relentlessly. Businesses are constantly measuring return on investment. If projects work and succeed, they continue to invest in them. If not, they redeploy their money to other programs that have a better chance of delivering return.

During my 25 years in international development and philanthropy, I have found that impact measures are often non-existent, ineffective and/or not reported back to donors. In a recent Wall Street Journal article, Steven Levitt, co-author of “Freakonomics,” sums it up precisely: “With philanthropists, much of the benefit and the accolades come when you give the money, not when you solve the problem, which I think is backwards. Nobody [is] really asking if their money does any good in the world.”

Philanthropic dollars should be invested in interventions, programs, and implementers that most effectively deliver measurable outcomes over a defined period of time. This is best accomplished when all stakeholders track resource deployment, compare target indicators to benchmarks, evaluate outcomes against realistic targets, and maintain accountability and transparency. At Geneva Global, we have spent years developing and refining a Social Impact Index that was designed to measure the multiple factors of a social development program. which contribute to its ultimate social impact.

The tool seeks to assess the social impact by scoring six components which are considered essential for a social development project: the impact on wellbeing, changing paradigms, breadth of impact, creating empowerment, depth of impact and quality of project implementation. The tool also measures four additional components, which are good predictors of social impact: depth of experience, community partnership, support of power brokers and degree of replication. Finally, the index measures innovation and a multiplier effect. The Social Impact score is only one component of a much larger set of measurements we provide to our clients. Ultimately we synthesize all the metrics and grade the investments made on behalf of clients as overachieved, achieved, underachieved, or failed.

Which brings me to the next point: Admit your failures and adjust accordingly. No one ever wants to say that they’ve failed, especially when you are working with other people’s money on devastating and debilitating problems like poverty, anti-human trafficking, and health. But in the business world, failure is accepted and even becoming a badge of honor to show that you’ve learned something along the way.

We’re very transparent to clients about the grant-making programs that we run on their behalf, including those that failed or underachieved. We take the time to understand what led to that underperformance and what new knowledge we gained as a result. Included in our client reporting is a section we call Lessons Learned where we explain what we learned — both from our successes and the obstacles we faced. Based on that knowledge, we adjust to help clients get better results from their philanthropic investments.

For example, we were overseeing a blindness prevention program in Zambia on behalf of one of our clients, and had been using three different hospitals, each of which procured its own supplies. It seemed most efficient to purchase drugs centrally using the most experienced hospital procurement team. However, when implemented, we found that there were delays and shortages. This was most likely because the larger order with a wider range of products made it harder to source and arrive on schedule. So we reversed course and went back to having each hospital source its own materials.

This type of analysis and constant improvement is core to our culture and we practice it in our own company. We just finished our annual Lessons Learned week where all our employees from all over the world came together to discuss and debate what we did well and where we need to keep improving.

Lastly, I’d encourage philanthropists to develop a greater appetite for taking risks. You aren’t going to affect real, long-lasting, positive change by playing it safe. Given we were birthed by investment managers, we encourage our clients to think of their social investments as they would an investment portfolio. Typically in a portfolio of many investments, only a small few will generate outsized returns, while the rest may only have a moderate impact. Which is why we advocate active portfolio management, where clients reallocate money from lower-performing programs to those that have proven to be above average. This encourages clients to get more comfortable funding riskier, more innovative programs.

Yes, you may have projects that don’t work as well as you expected, but it’s not a waste of money if you take the time to reflect what you learned, re-adjust accordingly and redeploy your investments.

Doug Balfour is the owner and CEO of Geneva Global.

business development, philanthropy