Funding for Impact: Transforming Our View of Giving, and Empowering Charities at the Same Time

You are approached for a donation by a charity. Does a voice in your head say with some resignation, “Sounds good, but I wonder how much money actually gets to the cause?” You’re not alone. However, we at the Social Impact Hub think that is not fair for the not-for-profit sector. And we are launching a national campaign to do something about it.

In general, charities and not-for-profits are judged regarding their efficiency.  Society assumes a charity is efficient if it keeps overhead expenses low and gives as much donated money as possible straight to the cause. Our society doesn’t often question the impact a charity is making.  If we want to solve social problems that are massive in scale, we need to encourage growth, risk and innovation within the not-for-profit sector, and overheads become irrelevant if real change is being made.

Inspired by American Dan Pallotta’s 2013 transformational TED talk “The way we think about charity is dead wrong”, we at the Social Impact Hub want Australians to think differently. Rather than thinking only about how much is going to the cause, we encourage donors to think about how much more impact a dollar can create if it is invested in building scale, and will ultimately make a much bigger difference. We want society to think about not-for-profits similarly to the way we think about for-profit enterprises; that they should be able to take risks and innovate, advertise and build scale. As Pallotta identifies, in our minds we have different ‘rules’ for charities, which are likely to keep them small. When we decide to not support a charity because it spends donations on advertising, we rob it of the opportunity to let a much bigger audience know about its activities, and thus it will generate less money, and its impact will be much less than it could be. There could be the difference between making $150 from an unadvertised local street stall and $150,000 from an idea that is advertised to a wide audience. Wouldn’t advertising be an excellent use of your donation if that was the outcome?

We call this concept ‘funding for impact’, and we all can contribute! Donors can ask how much impact will my donation really create?  Funders can empower not-for-profits to invest in innovation, technology and talent to grow impact.  Charities can identify opportunities with potential to maximise their impact and innovate and make them attractive for investors or donors.

Partnering with the peak body for giving, Philanthropy Australia, as well as Digital Storytellers, we at the Social Impact Hub are developing a national campaign to transform the way Australian society thinks about giving. The campaign will begin with a launch event in Sydney with Dan Pallotta on Thursday 10 May and will include a national media campaign, including TV, radio and print presence. The Funding for Impact project website centralises the campaign premise and houses educational resources to help donors fund for impact. We have written a series of case studies to show how funding infrastructure, talent, innovation, capacity and learning can result in greater impact.

The Social Impact Hub’s vision for the future is that donors want the not-for-profit sector to use their donations to build scale, and maximise their impact through marketing, attracting the best people, and innovating, just like the for-profit sector.

So, next time you are approached for a donation by a charity, instead of the voice in your head asking “I wonder how much of my money actually gets to the cause?”, you could be part of transforming the conversation by saying “Thanks for asking me to give. Tell me about the amazing impact my donation will have when you’ve put it to work.” In fact, sometimes if a charity provides a donation directly to the cause, it’s a missed opportunity to put that donation to work for greater impact.

The Funding for Impact project will be officially launched at Atlassian on Thursday 10 May.