Mapping the New World of American Philanthropy: Causes and Consequences of the Transfer of Wealth

Like almost everything else in the world, the landscape of American philanthropy is changing. Once little more than "an afterthought, a transfer of resources that was ad hoc and informal, carried out to respond to needs of the moment, pleas of the 'crise du jour', personal interests, or networks of close friends with favorite causes," the philanthropic sector in the U.S. today controls more than $300 billion in assets and is in line, over the coming decades, to grow significantly, as tens of trillions of dollars change hands from the so-called Silent Generation to the baby boomers and their children.

Inspired by the example of Bill and Melinda Gates, Warren Buffett, and others, many of the beneficiaries of the intergenerational transfer of wealth will donate a portion of those resources to charitable causes and nonprofit organizations. But how will this unprecedented transfer of wealth affect the nonprofits that stand to gain? How will nonprofits respond to the managerial and organizational challenges? And can American philanthropy continue to exist in its current form?

Those are just some of the questions addressed in Mapping the New World of American Philanthropy: Causes and Consequences of the Transfer of Wealth, a new collection of essays edited by Susan U. Raymond and Mary Beth Martin. As Raymond and Martin, senior managing directors at Changing Our World, Inc., a national philanthropic consulting firm, note in their overview to the first section of the book ("The Causes: Social and Economic Pressures Forming the New World"), the new world of American philanthropy is the product of profound social and economic changes. Those changes include the rapid aging and changing face of the American population, the growing influence of women in all aspects of American life, and the proliferation of philanthropic models and mechanisms.

In a series of short, statistics-laden chapters, Raymond, Martin, and their fellow contributors do a good job of outlining these trends and explaining their implications for philanthropy. The elderly, for example, are staying healthier far longer than ever before, while rural areas are aging faster than urban. Most nonprofits, however, were created to address the needs of low-income urban populations and pay little attention to aging or rural issues.

Globalization — of the economy and philanthropy itself — is another significant trend. Today's philanthropists tend to be more widely traveled and have a more globally focused understanding of issues such as women's rights and environmentalism than their predecessors. Similarly, many of America's most successful entrepreneurs are immigrants, and they, too, will play an increasingly important role in the philanthropy of tomorrow.

The book's second section ("The Effects: The New World Meets the Old Ways") describes new approaches to and ways of thinking about giving. In a series of chapters with titles such as "Listening to the Critics: Who is Actually Transferring What," "The Nonprofit as a Business Enterprise: Adapting to the Expanding Philanthropic Marketplace," and "New Philanthropy Has Arrived Now What?" Raymond, Martin, and others look at who is accumulating wealth in our society and how tax policy is likely to affect the multi-trillion-dollar transfer of wealth over the next few decades.

At the same time, nonprofits, which exist in an increasingly competitive philanthropic marketplace, must do everything within their power to develop sound and effective service-delivery mechanisms, output measurements, financial management systems, and fundraising plans, while demonstrating to foundations their impact, capacity, and sustainability. This section of the book also urges nonprofits to start thinking now rather than later about developing leaders who can manage a complicated organization and focus on a vision.

Section three ("The Impacts: Shifts, Adjustments, and Realignments") asks the question, Is a larger nonprofit sector necessarily better?, and concludes, among other things, that nonprofits will need to reengineer themselves to meet the challenges inherent in a rapidly growing sector. Foundations and individual donors, too, are likely to have to readjust to the new wealth sloshing through the system. A few years back, for example, the Salvation Army received a $1.5 billion gift from Joan Kroc, widow of the founder of McDonald's Corporation, which called for establishing a nationwide network of community centers even though the scope and size of those centers, as Raymond writes, "are quite different from either the Salvation Army's culture and mission or its style of operations."

As the size and public profile of philanthropy grows, so, too, will scrutiny of the sector — the focus of the book's final section ("The Reactions: New Rules for a New World"). Anne F. Glauber, executive vice president and director of the Global Communications Communication Group at Ruder Finn, a leading public relations firm, writes in "We the People: Public Trust and Expectations," that Americans are no longer "surprised to read another article about nonprofit malfeasance, because we do so with great frequency." Thus, regaining the confidence of the public will remain a critical challenge for the sector for the foreseeable future. And the first step to regaining that trust for individual nonprofits is to make communicating frankly with their audiences and being as transparent about their financial management as possible a priority.

Increased scrutiny of the sector also brings into play the very notion of tax-exempt status. As Raymond suggests in "The Tax Man Cometh: Should Nonprofits Pay?," the ever-rising number of nonprofit organizations has put the sector on a collision course with the needs and demands of a growing population. As the percentage of local government resources received from federal sources has declined from more than 26 percent to 20 percent over the last few decades, the capacity of local government to meet its obligations increasingly has come to depend on local taxation. But with more and more land and other taxable assets being removed from tax rolls by nonprofits, states and localities, especially in less affluent areas, are feeling the pinch. One essayist recounts the example of a large university that charges students tens of thousands per year in tuition fees and yet pays no taxes. Such examples raise any number of important questions. Do large nonprofits put an unfair burden on the infrastructures of their communities? What constitutes a nonprofit service and how does a locality judge the value of that service? And when, if ever, should a nonprofit pay taxes?

These are just a few of the many thorny questions and challenges facing American philanthropy as it moves into the twenty-first century. To help it meet those challenges, the sector will need new leaders with vision and fresh ideas to help chart its course. In Mapping the New World of American Philanthropy, Raymond, Martin, and their fellow contributors have done an admirable job of describing the landscape and pointing the way to a brighter future.

FEATURED OFF THE SHELF