Editor’s Note: I shared this article with our foundation’s board last week because Thomas Siebel’s success is the kind I strive for. Siebel decided that money doesn’t solve social problems, thinking outside the box does. His story and the author’s broadening of the concept to “catalytic philanthropy” makes me very hopeful that our little experiment will work. That is, that applying creative business strategies and disciplines to social problems may work. A deep bow to Messrs. Siebel and Kramer. [more]
Despite spending vast amounts of money and helping to create the world’s largest nonprofit sector, philanthropists have fallen far short of solving America’s most pressing problems. What the nation needs is “catalytic philanthropy”-a new approach that is already being practiced by some of the most innovative donors
Thomas Siebel does philanthropy differently from other donors. As the founder of the software company Siebel Systems Inc., he is one of a handful of philanthropists who have the resources to devote substantial time and money to charity. His approach and the results he has achieved, however, dramatically distinguish him from most of his peers.
In 2005, while spending time on his Montana ranch, Siebel became concerned about the rampant local use of methamphetamine, or “meth.” Meth is a highly addictive and physically destructive drug, and it is a particularly acute problem in rural America. In 2005, Montana had the fifth worst level of meth abuse among all U.S. states. Half of its inmates were imprisoned for meth-related crimes. The direct cost to the state was estimated at nearly $300 million per year, and the cost in human lives and suffering was far greater.
Rather than writing a check to a local nonprofit, Siebel took the time to find out why people become addicted to meth. After learning that first-time users were typically teenagers who were unaware of meth’s risks, Siebel created the Meth Project to change teenage perceptions about the drug. He brought together experts and hired a major San Francisco advertising agency to develop a hard-hitting campaign that would reach 80 percent of Montana teens with at least three ads every week.
The ads were world-class: With production budgets of $500,000 to $1 million each, they were directed by leading Hollywood figures such as Alejandro González Iñárritu, director of the Academy Award nominated film Babel. The ad campaign has won 43 awards in national and international advertising competitions.
The ads were gut-wrenching: Tested in focus groups to capture a teenager’s attention, they were far more brutal than anything the community had seen on television before. The 30-second spots begin with an ordinary teen whom kids can relate to, and end by showing the badly scarred and disfigured ravages that come from using meth. Teens are shown attacking and robbing their own families, prostituting themselves, or dying from an overdose. In one ad, a boy describes how his mother has always been there for him, while the screen shows him stealing her purse, hitting her, and kicking her away as she screams and desperately tries to grab his leg while he runs out the door.
And the ads were pervasive: Because Montana is a small media market, Siebel’s $2 million annual advertising budget generated more than 45,000 television ads, 35,000 radio ads, and 1,000 billboards in the first two years. The Meth Project became the largest purchaser of advertising in the state. The results have been stunning. Between 2005 and 2007, meth use in Montana dropped 45 percent among teens and 72 percent among adults, while meth-related crimes fell 62 percent. The percentage of teenagers who were aware of meth’s dangers increased from 25 percent to 93 percent, and teenagers have even begun to dissuade their friends from trying meth. Montana’s ranking among U.S. states in meth abuse fell from fifth to 39th.
Siebel has continued the campaign, using teen focus groups to develop new advertising campaigns every nine to 12 months. He has convinced other funders to support the campaign and encouraged schools and community organizations to sponsor anti-meth events. Siebel has also personally lobbied Congress to combat the meth problem. Six other states have adopted the Meth Project’s program.
Siebel’s success in fighting meth abuse stands in stark contrast to the modest and often indiscernible results that most philanthropists have achieved, whether individually or collectively. Between 1980 and 2005, U.S. annual charitable giving in constant dollars grew by 255 percent and the number of nonprofits more than doubled to 1.3 million. Today, per capita giving in the United States is three times greater than any other country in the world. Yet, during this same 25-year time period, the United States dropped from second to 12th among the 30 countries that are members of the Organisation for Economic Co-Operation and Development (OECD) in basic measures of health, education, and economic opportunity.
To be sure, philanthropy cannot be blamed for the persistence of childhood poverty and failed schools that result from much larger political and economic forces. Without philanthropy, conditions would likely be even worse. Yet whatever benefits philanthropy may provide, it is not delivering the kind of social impact Siebel achieved. If philanthropy is to become an effective way of solving pressing social problems, donors must take a new approach.
Siebel is one of the exemplars of this new approach, but there are others. These exceptional donors—whether foundations, corporations, or individuals—do not write the largest checks, but they do act differently from other donors. They have expanded the toolkit of strategic philanthropy beyond even the most recent thinking of venture philanthropists and social entrepreneurs, creating a new approach to bringing about social change that I call “catalytic philanthropy.” Before turning to a discussion of the practices that distinguish this new form of philanthropy, it is important to understand why the conventional approach so rarely produces measurable impact.
Limitations of Traditional Philanthropy
For most donors, philanthropy is about deciding which nonprofits to support and how much money to give them. These donors effectively delegate to nonprofits all responsibility for devising and implementing solutions to social problems. Despite the sincere dedication and best efforts of those who work in the nonprofit sector, there is little reason to assume that they have the ability to solve society’s large-scale problems.
The overwhelming majority of the 1.3 million U.S. nonprofits are extremely small: 90 percent of their annual budgets are under $500,000 and only 1 percent have budgets greater than $10 million. Each nonprofit is capable of helping hundreds or even thousands of people in need, and many of them do so in creative and highly effective ways. Despite their often-heroic efforts, these nonprofits face severe limitations.
Each nonprofit functions alone, pursuing the strategies that it deems best, lacking the infrastructure to learn from one another’s best practices, the clout to influence government, or the scale to achieve national impact. A majority of the very largest nonprofits that might have the resources to effect national change are hospitals, universities, and cultural organizations that focus primarily on their own institutional sustainability. Collaboration throughout the sector is almost impossible, as each nonprofit competes for funding by trying to persuade donors that its approach is better than that of any other organization addressing the same issue. Very few systematically track their own impact.
However generous the donors or hardworking the nonprofit staff, there is no assurance—nor even any likelihood—that supporting the underfunded, non-collaborative, and unaccountable approaches of the countless small nonprofits struggling to tackle an issue will actually lead to workable solutions for large-scale social problems. The contributions of conventional donors and the good work of effective nonprofits may temporarily improve matters at a particular place and time, but they are unlikely to create the lasting reform that society so urgently requires.
Four Practices of Catalytic Philanthropy
What is needed is a new approach to philanthropy, one that catalyzes the kind of social change exemplified by Siebel’s Meth Project. Over the past decade, the consulting firm that I cofounded, FSG Social Impact Advisors, has studied many examples of this new approach to social change. We have distilled what makes catalytic philanthropists so effective into four distinct practices: They have the ambition to change the world and the courage to accept responsibility for achieving the results they seek; they engage others in a compelling campaign, empowering stakeholders and creating the conditions for collaboration and innovation; they use all of the tools that are available to create change, including unconventional ones from outside the nonprofit sector; and they create actionable knowledge to improve their own effectiveness and to influence the behavior of others.
Each of these practices stands in distinct contrast to the practices that most donors, foundations, and corporations follow today. To understand why these four practices are important, each will be considered in turn.
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