The Current State of Play: Philanthropy is Rife with Inefficiencies
Philanthropy involves three primary groups: Companies and institutions, whose donations account for a significant portion of global giving; individuals, who approach philanthropy as a way to express their values and impact the world; & the nonprofits or charities who collect donations & execute social impact programs. Unfortunately, today, the standard philanthropic model doesn’t adequately serve any of these groups.
Conventional approaches to CSR & corporate giving are, at present, lacking.
Companies still approach philanthropy as a form of product – something that has to be operated, managed,
and serviced in-house. The future is for corporate philanthropy to be approached as a service.
In other settings, the brilliance of the as-a-Service model has long been acknowledged. Consider software: “as-a-Service” is the opposite of “as a product.” In the world of software, previously, companies had to buy software with a big upfront cost, download the software onto physical systems, install it, maintain it – and so on. Software-as-a-Service (SaaS) came along and removed all this hassle. With SaaS, you pay a smaller monthly cost, and someone else handles all the servers, updates, data, memory, et cetera – you just plug in to a lightweight system that already exists and is run by experts.
What the “XaaS” model basically means is – someone else does all the complex, boring, admin. You just get what you need, at a transparent cost and without headaches.
In the philanthropy setting, the legacy, product-minded approach looks like this:
- An organization wants to do philanthropy.
- They incorporate a company foundation and form a separate board of directors.
- They are forced to retain accountants and general counsel to ensure they comply with IRS and state regulations.
- They build systems to identify, research, and vet charities that they want to support and then create a grant application process that charities must complete.
- They then have to handle all the admin: the paperwork, the banking, the reporting – everything. Foundation staff have to onboard the right tools, and put a structure in place to manage everything moving forward.
With philanthropy, the result of the “product mindset” is either a major new cost center that conforms to existing monolithic philanthropy models or, for companies lacking formal CSR departments or company foundations, philanthropy remains ad-hoc.
Purpose-built technology designed to increase efficiency in philanthropy is rare. And so companies have to implement legacy platforms, or force a square peg into a round hole by retooling other pieces of software purpose-built for traditional sales or other corporate function.
Then, the organization will cut checks here and there, or sponsor events – but these decisions are not programmatic, and they’re highly centralized. Additionally, the matching program, if it exists, is cumbersome and admin-heavy.
Individuals in the 1% of earners are able to have a large charitable impact on the world because of tax-advantaged financial vehicles, philanthropic advisors, and custom tools. However, in the antiquated model of philanthropy, individuals are shut out from most of these options:
The tools and strategies available to ultra-rich philanthropists are inaccessible to the average donor.
This is true at even the most basic levels, such as finding the right causes to give to. The 1% have teams of experts to discover and vet causes. Average donors often want to take action on issues they see or care about – but don’t know how to find the right organizations to support.
Perhaps the most significant disconnect is in the area of taxes. There are savvy ways to give, which both incentivize the donation while benefiting the non-profit. However, normal donors don’t know about these options – or if they do know about them, they don’t know how to access them. For example, they are unable to donate appreciated assets to take advantage of significant capital gains tax advantages. Even if they are familiar, the administration is just too much.
Tracking donations throughout a year is cumbersome and often impractical, leading many to lose out
on valuable tax deductions.
Additionally, in an area where individuals might participate in larger-scale, more impactful giving – through the efforts of their company – they are often on the outside looking in. Either they don’t get a say at all, with a CEO deciding everything, or, if they have access to a donation matching program, this program is probably rife with delays and administrative processes, leaving them without the philanthropic buzz they want.
What is Philanthropy-as-a-Service?
As we explained to The Hustle, a Philanthropy-as-a-Service model allows companies and individuals to integrate giving into their charitable strategies far more effectively and innovatively.
With a Philanthropy-as-a-Service model, charitable giving experiences near-constant innovation as a purpose-built, third-party software company researches, designs, builds, and launches new tools to corporate, individual, and nonprofit customers.
Setup, maintenance, support – all of this happens on a lightweight, ongoing basis, with consistent costs and a minimal operational burden to the user. The business achieves its macro goal: their people can donate to a charity of their choice with a few clicks, in an easy-to-use app.
Conventional approaches to CSR & corporate giving are, at present, lacking.
Companies still approach philanthropy as a form of product – something that has to be operated, managed, and serviced in-house. The future is for corporate philanthropy to be approached as a service.
With philanthropy, the “product mindset” is what creates all the shortcomings enumerated above. For companies without CSR departments, philanthropy is often ad-hoc, driven by poor or inefficient tools and processes, burdened by admin, and highly centralized.
With a PhaaS platform, corporations can avoid starting their own formal foundation and instead opt for a corporate donor advised fund, and they can decentralize their philanthropy and funnel it through their employees. This way, they can reduce cost and create more impact in their employees’ communities, while improving employee morale and retention.
In a PhaaS model, the administration of corporate philanthropy can be placed on autopilot, philanthropy can be a benefit. A handful of employees can work to implement a purpose-built platform and configure a handful of options – all within a single afternoon. From there, all the complexity of funding, compliance, corporate matching, and reporting is handled by the system, and ongoing administration is nearly reduced to zero. Finally, the corporate giving program can actually reflect the wants of their employees, who desperately want their work to have a higher purpose. Companies are left to simply watch their philanthropic impact take root and measure the positive improvement in employee morale and retention, not to mention a positive impact to workplace culture.
The vast majority of people don’t have access to the giving tools of the 1%: complex personal foundations where someone else manages the giving, formalized access to grant networks, staff to conduct research and due diligence, etc.
As a result, today, individuals generally take a pretty limited approach to giving. They pick a couple of causes and cut a couple of checks. If they’re savvier than most they might make a recurring gift with a credit card. That’s it. This model hasn’t really changed in decades – or even centuries.
What a PhaaS platform offers is a way for individuals to offer sophisticated giving tools within a single digital hub.
Additionally, within a PhaaS framework, donors can easily track all of their philanthropic giving – regardless of how many contributions they’re sending in a given year, or how many charities they’re sending them to. Individuals get access to a unified picture of their giving over time, utilizing modern technology.
A truly modern PhaaS platform even leverages new technologies like artificial intelligence and machine learning to help drive custom recommendations of what organizations are doing best-in-class work in the areas that individual donors care about. With this, humanity is restored to the act of giving.