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Next gen donors and their plan for greater impact

A first-of-its-kind national study shows that Gen X and Millennial major donors aim to revamp philanthropic strategy and take risks on new tools.

Article from Stanford Social Innovation Review. By Michael Moody & Sharna Goldseker Feb. 12, 2013

The next generations of major donors have the potential to be the most transformative philanthropists in history. The Gen Xers and Millennials who are inheriting the $40 trillion wealth transfer, along with those making their own wealth, will control unprecedented amounts of philanthropic resources. These “next gen donors” will face immense, complex social problems in their lifetimes, requiring that they be both generous and thoughtful about their giving.

They will be the major donors in America for decades to come. Yet we know little about what kind of philanthropists they aspire to be.

This week, the Dorothy A. Johnson Center for Philanthropy and 21/64, a nonprofit consulting practice specializing in next generation and multigenerational strategic philanthropy, released the results of a first-of-its-kind national study that sheds some light onto this powerful, yet previously understudied group. The research helps us understand what we can expect from these next gen major donors, and how they just might revolutionize philanthropy.

The report reviews findings from a national survey and 30 in-depth interviews with 21-40 year olds who either come from high-capacity families, or who have high capacity themselves. Three out of four participants in the study come from families with a foundation, 36 percent are from families with at least one (and often multiple) donor-advised fund. More than 20 percent also have their own donor-advised fund or foundation. Fifty percent say they are already very or fairly experienced in philanthropy, and nearly all say they expect to get much more involved in philanthropy in the years to come.

The question is, as these rising generations get more involved, what kind of donors will they be? Will they continue to give like their parents and grandparents? Will they reject the traditional and embrace the new?

While the post-Baby Boom generations have often been characterized as either cynical Gen Xers or entitled Millennials, the next gen donors we heard from are, on the whole, quite the opposite. They are motivated by values, not valuables. They are respectful of legacy, not reckless. They are eager to be involved in stewarding their family philanthropy, and freely admit to the influence their parents and grandparents have had on their philanthropy.

While they are not looking to rebel, these rising major donors do have their own approach to giving and are starting to put that approach to work now. While they perceive their parents and grandparents as driven by obligation, recognition, and tradition, they see themselves as driven by strategy and impact. As one survey respondent put it, “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.”

Next gen donors want to change how they give, more than what causes they support. They want to revamp philanthropic strategy in ways that can make it more effective.

They want to “conduct due diligence and research before deciding who to support; first decide philanthropic goals or ideal solutions, then search for potential recipients who fit those; fund efforts that address root causes and attempt systemic solutions; and have information about an organization’s proven effectiveness or measurable impact before deciding whether to support it.” These are the top four components of philanthropic strategy—out of 22 possible choices—that our survey respondents prioritized.

Next gen donors want to use any necessary strategies, assets, information, and innovative tools to achieve this impact. If making an impact requires taking risks on start-up organizations, boundary-blurring hybrids, or nontraditional vehicles, they are prepared to take those risks. If it requires impact investing, microloans, or collaborative giving circles alongside institutional grantmaking, they are ready for that—even excited.

As one interviewee puts it:, “I think it's a very exciting time to be involved. People are thinking differently about philanthropy. They are not just writing checks to established nonprofits, —to the United Way or the Red Cross. They’re saying, ‘Well, there are these Kiva loans and there are these social businesses and there are these double-bottom-line, triple-bottom-line investments.’ There are a million different ways to be philanthropic in 2012 that there weren’t in 1985.”

Next gen donors want impact they can see. They want to make a difference, and they want to know that their own involvement has contributed to that impact. Often, this means getting out into the field and getting their hands dirty working closely with organizations. As one 30-something interviewee describes an international site visit to a program she funded, “I travelled to Central Africa with a small team to see the situation in person and came face-to-face with what we have been discussing in a more abstract way while sitting around the boardroom table in a Manhattan office.”

We have experienced a long period of generational stability in the philanthropic world. The Greatest Generation and the Baby Boomers have created and guided almost all of our key institutions for years. But while we weren’t looking, their children and grandchildren grew up, and now they hold the future of philanthropy in their hands.

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