It seems a moment, one of those zeitgeist moments when people start to question the status quo, they look around for what is wrong, what might work better and they seek change. What better time to start blogging about a field that desperately needs innovation, needs one of those zeitgeist moments, needs transformation: philanthropy.
Still, in this blog, just because I believe we are in a moment of transformation, I decided against using the tag philanthropy, but instead to focus on social business, which seems more fluid. I thought also that it would be worthwhile to start with a recurring and vital topic, why so little risk tolerance in the social sector at a moment when need is so great?
I recently completed an excellent week-long social entrepreneurship course at Insead in Singapore. The participants were fantastically interesting, the discussion great and the professors, from Insead’s Singapore and Fontainebleu campuses, top notch. The theme of risk aversion emerged as the bottleneck for all of us. We all identified a lack of patient risk capital in the social business sector.
Today, I found an excellent blog entry and discussion on the topic here: http://socialentrepreneurship.change.org/blog/view/ philanthropic_capital_needs_to_take_more_risks. Nathaniel Whittemore also asks the question why the risk aversion?
I believe that in recent years many have fallen into the trap of trying to over-assess our impact, which of course can be measured in so many ways. Many organizations feel compelled to bend programs to meet targets rather than respond to real need in new ways. As Whittemore points out, perhaps the overriding form of measurement is overhead costs, which may or may not mean anything depending on how a non-profit organization addresses a particular social problem. Inevitably, some forms of interaction with a community will be more costly than others – particularly those that involve needed and lengthy due diligence, consultation or interaction with the people the organization is hoping to serve. Presumably its exactly this constituency that can best inform or generate innovation?
The other factor limiting risk tolerance in the sector might be the potential reputational risk involved with funding a start-up initiative. This certainly springs from the real concern that a foundation must be careful with donor funds since presumably those have been hard-earned and shouldn’t be “wasted.” Part of the problem, here, though is the emphasis on maintaining the donor stream and the belief that publicized errors might scare away future support. The easy route then is to fund the tried and tested, the organizations that everyone knows – safety in numbers. If something goes wrong, it goes wrong for everyone “invested.” No one’s reputation is really at stake.
I am constantly surprised by the lack of risk and innovation in the wide field of philanthropy and indeed in the act of giving itself for most people. Even entrepreneurs or those who in their for-profit lives spend real time thinking about securing a financial return, often do not consider this when investing philanthropically. They prefer to give safely regardless of how those funds are used or to what end.