The “Peanut Butter Manifesto” written by a Yahoo executive in 2006 gave us the term Peanut Butter Approach. It’s a business term that describes spreading anything—money, energy, time—too far and too thin to be effective or useful. Dropping change in bellringers’ buckets, rounding up your purchase to benefit a local shelter—charitable giving can become diffuse quickly. You forget how much you gave or who you gave it to, and you rarely see the results.
It’s tempting to give in to the “peanut butter” way. It’s an impulse (and a good one) but impulses are by definition not strategic or particularly careful.
As a high earner, you have the resources to make a difference in the world, but only if you take as serious an approach to your giving as to other areas of your financial life. Impulse giving and ad hoc donations may feel good in the moment, but the focus and planning of strategic philanthropy offer you an opportunity to make the scale of impact that can be effective and satisfying in a more enduring way.
What Is Strategic Philanthropy?
Strategic philanthropy is the careful process of aligning your charitable giving with your interests, values, and intentions and structuring your donations to help maximize the impact through your chosen charities. If, for example, you’re concerned about childhood hunger, strategic philanthropy could involve choosing organizations that are both dedicated to finding solutions to these problems and set up to have a good chance for success. Then you need to structure your giving so that every dollar can have a significant impact on that success. This means giving at a level and cadence that can support your grantees in the way they need to be supported.
Strategic philanthropy takes into account both your wants and needs and the wants and needs of your chosen charities, maximizing results for both.
The Difference Between Strategic Philanthropy and the Peanut Butter Approach
The obvious issue with peanut butter philanthropy? It’s not as effective.
You don’t feed the hungry with $2,000, and you don’t save the proverbial whales with a one-time gift to the zoo. Every little bit may help, but the most effective philanthropy depends on long-term relationships. Real change takes time and money—and significant amounts of both.
The risk-averse voice in your head may tell you to hedge your bets and diversify your charitable investments. After all, this is what you do with your investment portfolio. However, it doesn’t work the same way in philanthropy and may be riskier than focusing your giving. Smaller gifts tend to keep all grantees at mediocre levels of performance rather than giving them the boost to make significant forward strides. And you end up with a lower ROI, in terms of impact and satisfaction.
Strategic giving involves making informed and often fewer, larger investments over time to create a greater impact in your chosen arenas.
The Key Components of a Philanthropy Strategy
1. Define Your Charitable Goals
The first step toward focusing your philanthropy is to determine what matters most to you. Maybe you give intermittently to the family alma mater because that’s what mom and dad always did. But it isn’t a cause that creates any feeling of excitement or accomplishment for you personally.
On the other hand, you may find yourself deeply moved by the cause and efforts of a philanthropic organization you’ve read about in the news. You find yourself looking for more information about them and dreaming about how to help. Maybe it’s time to develop a deeper, more advocacy-focused relationship there. You want to choose causes that align with your values and that you feel a strong connection to.
2. Select the Right Charitable Organizations
Many charitable givers don’t research the causes and organizations they support. They give because it’s expected in their family or friend group, or they take word-of-mouth recommendations. This can lead to giving to organizations you don’t feel strongly connected to or invested in.
Worse yet, not doing the proper research can lead to supporting poorly performing or even fraudulent organizations that spend your money in ways you didn’t intend. You want to know your money is going toward actual cause-related programs, not to more fundraising, administrative overhead, or lining the pockets of its founders. CharityWatch publishes an annual list of the lowest-rated charities in the US, based on how they spend their donated funds.
Other third-party social responsibility-focused companies like Charity Navigator can also help research who you want to work with. This group evaluates charities on their financial practices and transparency. Charity Navigator also breaks down charities’ missions and performance indicators. They keep abreast of fundraising issues and questionable practices and how an organization has (or has not) addressed them.
3. Evaluate Your Prospective Grantees’ Charitable Impact
Impact measurement assesses the tangible outcomes and long-term effects of a charitable organization’s efforts. Useful metrics can include the number of individuals served, lives improved, communities uplifted, environmental benefits achieved, and more. A reputable charity should be transparent about these qualitative measures. Evaluating impact can give you insight into the effectiveness of your contributions and help you make informed decisions about future giving.
4. Structure Donations for Tax Benefits and Longevity
Strategic philanthropy should integrate with all your financial plans to support personal goals such as tax minimization and income optimization. Strategic giving can create significant tax advantages when structured appropriately and, of course, the less money you need to pay in taxes, the more will be available for your family and your chosen charities.
Overcoming Common Challenges in Philanthropic Planning
There are some basic challenges that strategic philanthropy and advance planning can help you overcome.
How Do I Avoid the Peanut Butter Approach?
Stay focused on high-impact giving. You don’t have to stop rounding up at the cash register but don’t think of that as your philanthropic plan.
How Do I Balance Philanthropy with Wealth Management?
Think long-term. Carefully coordinate your giving plans with tax planning, income opportunities, and estate planning.
How Do I Avoid Making Mistakes in Choosing the Right Charitable Partners?
Do your due diligence on potential grantees, considering:
- Mission and impact
- Leadership and governance
- Transparency and accountability
- Financial efficiency
Next Steps in Strategic Philanthropy: Building a Successful Giving Plan
Impulse giving may provide a temporary emotional boost and help charities keep their heads above water, but strategic philanthropy can increase your personal satisfaction and sense of fulfillment long-term and help charities make real strides forward in solving major problems. These goals are well worth the time, money, and careful planning.
A financial advisor with a comprehensive picture of your finances can be a valuable partner, helping you develop and maximize a personalized giving plan and structure your donations to provide the desired benefits.
To be custom-matched with a fiduciary you can trust to support all your financial goals with customized planning, take advantage of our advisor matching program today.
Paul West is not affiliated with Cetera Advisor Networks, LLC.
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