Philanthropy's Big Risk

June 12th, 2012

One of the Guiding Principles of the William and Flora Hewlett Foundation states that the foundation “‘focuses on the most serious problems facing society where risk capital, responsibly invested, may make a difference over time.’” They are investing in strategies where the probability of success is small and frequently challenging to measure. The article by Paul Brest outlines a framework the foundation is using to determine where to invest their dollars and how to evaluate the impact of their investments over time to affect social change.

The “ex-ante” (before the event) point of view looks at the likelihood a program or organization has of achieving its intended objective. Using the theory of change, an empirically based “if-then” theory linking activities and outcomes, one can look at which strategy a program has chosen for affecting change and the probability of its success based on similar work done either by the same organization or other organizations. Using the logic model, one examines the logistics involved and resources needed to implement the strategy. Finally, one can calculate the program’s value by predicting the cost per participant or similar value assessments to predict how much value the philanthropist is getting for each dollar invested.

The “in progress” point of view looks at the program while it is underway to assess whether it is on track toward the intended objectives. At times, adjustments may be needed to better influence the intended outcomes; sometimes it may be best to press pause; and under certain circumstances, it may be necessary to pull the plug and abandon the investment.

The “ex-post” (after the fact) point of view looks at whether the strategy reached its intended objective. This is where one can determine what kind of impact was made, and where both the philanthropist and the grantee can learn from both the successes and failures of the endeavor.

Brest reminds philanthropists that “taking appropriate risks may be philanthropy’s highest calling.”

Download the full article by Paul Brest published in the Summer 2012 Stanford Social Innovation Review above.

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