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December 4, 2013

What do the next generation of major donors want?

Author:

Alliance Magazine

What do the next generation of major donors want?

 

By Amy Clarke, Ben Eyre, Sharna Goldseker, and Michael Moody

December 2013

We hear a lot about ‘next gen donors’ and how they will change philanthropy and social investment. But what we hear is not always consistent, nor is it based on systematic data gathered directly from the next gen donors themselves. Two recent studies of this crucial group help to give us a more informed picture of who these new donors are and what they want from their philanthropy.

Some worry that the rising cohort of major donors – those now in their twenties and thirties – will be free-wheeling, free-spending global jetsetters, crushed by the weight of the trillions in wealth predicted to transfer to their hands in the next half century, and prone to rash investments in flashy but ineffective social ventures. Others worry that these new philanthropists will neglect traditional causes in favour of whatever their friends are talking about on social media. Or worse that they will ‘engage’ as donors solely by clicking the ‘Like’ and ‘Give’ buttons on a website.

What everyone agrees on is that these next gen donors have the potential to be the most significant philanthropists in history, given the size of the assets they will be able to contribute, and the pace of innovation in the social sector. No one doubts the importance of knowing more about what they want.

The major donors we studied are in a crucial stage of developing their philanthropic identities, which will in turn shape global giving and social investment for decades to come. While our two studies were not connected, and while they gathered data from different populations, we arrived at many similar and somewhat surprising conclusions. For the most part, these rising donors are thoughtful about giving, and want to be personally engaged in their philanthropy. They want to be taken seriously as strategic donors looking to make a significant impact, often in collaboration with
members of their networks. But there were also some differences in our findings that raise new questions about the next generation.

Impact-focused and looking for new strategies

Impact measurement has been moving up the philanthropy agenda for years, yet our two studies confirm that the focus on measuring the tangible difference giving makes is going to be even more critical for these next gen donors than for previous generations.
They want to innovate new strategies to maximize this impact.

In the Future Stars global survey, 52 per cent of respondents under 30 said ‘I want to make a tangible difference and impact’ when asked ‘what type of giver are you?’
compared to 43 per cent of those over 45. Similarly, the NextGenDonors survey respondents, when asked which elements of philanthropic strategy were important,
rated ‘conduct due diligence’, ‘address root causes’ and seeing evidence of ‘proven effectiveness and measurable impact’ as among the top five.

One of the NextGenDonors respondents cited this as a generational difference:

‘I believe my parents give much more for the “feel good” feeling that comes along with giving, whereas I am dead-set on maximizing the impact of my philanthropic dollars.’

Having bought into the measurement idea at a young age, it seems that next gen donors aim to bring about sustained gains for society through more impact-focused giving.

Achieving an impact through asset allocation – in addition to giving – seems to be very appealing to next gen donors as well. Interest in impact investing is growing as next
gen donors yearn to achieve more with their philanthropic capital. One US donor commented:

‘My generation doesn’t think you need to sacrifice positive social impact for earning
money. Those two things don’t just coexist together but are actually inherently
aligned and that is actually the way the world should work, that I should be adding both social value and financial value to me and everyone else.’

We found that interest in other new innovations – such as social enterprise, entrepreneurial social ventures and collaborative vehicles – is also growing among the
next generation. It seems that they want to use every tool in the philanthropic toolbox, even the risky ones, to achieve greater impact.

What causes are they interested in?

What about the causes on which these next gen donors want to make this impact? Are these the same as for previous generations, or for donors around the globe?

Our two surveys found that while many of the causes are the same across generations – for example, education and basic needs – there are some important differences. The next generation is relatively more interested in giving to environmental or economic
inequality causes, and less interested than older generations in religion, health, youth/children and the arts. The global sample of young donors in the Future
Stars study also show a greater interest in global issues than the US donors in the NextGenDonors report. The US donors were relatively more focused on engagement
with problems closer to home.

Hands-on and looking to add value

But the next generation differs most in how they want to approach their giving. They are focused on creating impact, and doing so using new kinds of strategies and
innovations. They want to change how major donors engage in their philanthropy. Our two studies highlighted the growing demand by next gen donors to ‘connect’ more with their giving activities. They want philanthropy to be an intense, ‘need-to-have’ lifestyle
choice, not an occasional, ‘nice-to-have’ add-on activity. In their responses, we heard that philanthropy should be hands-on, more than writing a cheque. It should
make a meaningful contribution through close engagement with people and organizations.

One young donor, quoted in the Future Stars report, focused on philanthropy at the beginning of her entrepreneurial career:

‘When I started the business, I knew I wanted to have a charity aspect to it. I had always worked in fashion, but I wondered if I could do more. Fashion is light-hearted, fun and beautiful, but I wanted an element in the business that kept me grounded and made sure I didn’t forget about the real needs of people.’

Other under-30 respondents to the Future Stars survey said that they want personal involvement with causes about which they care deeply. Under-30s were twice as likely as those over 45 (33 per cent vs 16 per cent) to say this.

Donors interviewed for the NextGenDonors report echoed this interest in making philanthropy ‘not only something that we give financially’ but something ‘that permeates our everyday life, that we give of our time, of our intellect’.

These rising young donors choose to engage in two ways. First, they want to actively partner with their NGO of choice to help shape and deliver the projects they support. They want to see their contributions at work and to have the assurance that those funds will be leveraged to their fullest extent. Another US donor interviewed for the NextGenDonors report said this was a difference in his style of philanthropy compared to older members of his family, noting:

‘I am more of a mile-wide, hundred-mile-deep guy where you just get to know everybody very well, you have a very close relationship, you really believe in the organization, and your money makes a big impact on that organization.’

Second, next gen donors want to invest not just their money, but also their time, talents and skills to help shape the future growth and sustainability of the organizations they support. They want to roll up their sleeves, open their toolbox of skills, and help solve problems. They want to travel to where the organizations they support are working on the ground to see tangible change. This hands-on orientation was a key
finding in both of our reports and it presents a vital and positive opportunity for family, advisers and NGO leaders who seek to engage next gen donors to build a
relationship of working with one another instead of for one another.

Influenced by family . . .

As we did, readers might initially assume that Gen X and Y donors would be most influenced in their giving by Twitter and Facebook. But both of our studies show,
instead, that ‘old school’ channels of information play a bigger role for next gen donors then we expected.

The most widely cited influence on the philanthropy of donors in the NextGenDonors survey was parents (89 per cent), followed by grandparents (63 per cent), close friends (55 per cent), and peers (47 per cent). Similarly, in the Future Stars survey, donors under 30 were more likely to turn to family members, peers and giving circles for information on philanthropy than were their counterparts over 45, who were more likely to consult accountants.

Both studies found parents and older family members were eager to involve the next
generation in philanthropy at an early age. Over 40 per cent of the US donors in the NextGenDonors study said they first became actively involved in their family’s
philanthropy before the age of 21. Both studies also found that, despite this strong early influence of families, next gen donors tend to want to emerge from under their parents’ philanthropic wing. One US donor said first, ‘my family has taught me everything I know about giving’, and then quickly clarified, ‘I approach it very differently and, of course, bring different things to the table as a young person with a fresh perspective.’

. . . and looking for peers

In short, where next gen donors are now is not where they want to be, or where they think they will be in the future. They seem predisposed to embrace opportunities
to learn and are especially attracted by opportunities for peer learning. Whether from situations of inherited philanthropic opportunity or earned wealth, both studies found a keen interest among the next generation in collaborative peer giving vehicles. They want to leverage their peer networks to, again, create greater impact.

One young donor from the UK considers this peer orientation to be a hallmark of her generation. ‘The community aspect is so key to me. I think that was lost in the last generation. I am always looking to put people back in touch with each other.’ A US donor from the NextGenDonors study concurs: ‘[Giving] is so much better when there are 20 other people around the table.’

Looking to the future

The days of Dickensian charity might finally have passed. The new donors coming of age now will be working in a very different philanthropic landscape, even if some of
the scenery is familiar.

It is exciting to see the potential for next gen donors to redefine how societies around the globe deal with the issues they face. Next gen donors don’t want to outsource delivery of social solutions; they want to be part of the solution and they are willing
to bring the resources of their families, friends, peers and workplaces, as well as their skills and their time, to bear as they engage closely with the organizations they believe in.

There are many questions still to be answered about this group with outsized philanthropic potential. What about emerging donors in other parts of the
globe such as Africa or Latin America? How might wealth creators differ from inheritors? How much do certain experiences with philanthropy matter? How
will the next generation react to unintended failures or frustrations in their philanthropy? Will the preferences we found now change as Gen X and Y donors age?

Hopefully our two studies provide useful initial insights into what next gen donors want, and how these generations want to go about giving what, by all accounts,
is an unprecedented amount of philanthropic resources.

They want impact. They want engagement. They want to be closely connected to the organizations they support and to their peers. They want to be taken seriously as donors.

This article was originally published in the December 2013 issue of Alliance magazine. The original article can be found at www.alliancemagazine.org/en/content/december-2013. For more information about subscribing to Alliance, please visit www.alliancemagazine.org/subscribe.

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