Melissa Berman, President/CEO, Rockefeller Philanthropy Advisors: Creating Change Through Informed Philanthropy

April 12, 2006
Melissa Berman, President/CEO, Rockefeller Philanthropy Advisors: Creating Change Through Informed Philanthropy

Over the next three or four decades, new technologies, globalization, the growing ethnic and cultural diversity of American society, and an intergenerational transfer of wealth estimated at between $6 trillion and $40 trillion will combine to dramatically change charitable giving in the United States. New and growing demands on society — at home and abroad — will create new and greater expectations for philanthropy. Failure to meet those expectations, in turn, will result in ever-greater consequences, social as well as political. To meet the challenges of the 21st century, philanthropy will need to be smart, flexible, open, and bold.

In March, Philanthropy News Digest spoke with Melissa Berman, president and CEO of Rockefeller Philanthropy Advisors, a full-service philanthropic advisory firm, about the changing philanthropic landscape, the link between information and effective philanthropy, and the likelihood of regulatory changes in the field.

Berman has led Rockefeller Philanthropy Advisors since January 2001. Prior to that, she was senior vice president for research and program development at the Conference Board, a business research organization, where she oversaw the organization's research and publications on management practices, global corporate citizenship, and governance.

A frequent speaker, she has been profiled in the New York Times, and her ideas and views have been featured in the Wall Street Journal, BusinessWeek, the Financial Times, USA Today, Town & Country, the Boston Globe, and the Houston Chronicle.

Berman holds degrees from Harvard and Stanford, and serves on the boards of City Harvest and the Foundation Center, and on advisory panels for the Ron Brown Award for Corporate Leadership and New Ventures in Philanthropy.

Philanthropy News Digest: What are the origins of Rockefeller Philanthropy Advisors?

Melissa Berman: Our roots go back to the 1890s when John D. Rockefeller engaged a gentleman named Frederick Gates, who was both a businessperson and a minister, to help him make decisions about the myriad philanthropic requests he was receiving — in part because Mr. Rockefeller had come to realize that he needed to make decisions at what he called the wholesale, rather than retail, level. Ever since then, the Rockefeller family's business office has included individuals who help family members with their philanthropy. In 2001, the family decided that because of the growing interest in philanthropy, it would be a great time to spin that group out of the family office and turn it into an independent nonprofit advisory service for donors around the world. And that's what we did, in January of 2002.

PND: What kind of services does RPA offer?

MB: We help donors plan their philanthropic program and do research on their behalf about giving opportunities and strategies. In a way, we serve as a sort of outsourced foundation staff, helping them put together program guidelines, conducting site visits, soliciting proposals, preparing dockets, monitoring grants, and so on. We also have a donor-advised fund under our aegis that can be used for both international and domestic giving, as well as to house special projects and initiatives related to philanthropy.

PND: Do you and your colleagues have a working definition of philanthropy, and if so, how is it reflected in your work?

We think of philanthropy as a process whereby a donor thinks about how to use his or her resources to make change happen....

MB: We think of philanthropy as a process whereby a donor thinks about how to use his or her resources to make change happen — everything from the kind of change, to the resources needed to make that change happen, to how you measure success. We believe that every donor who comes to us should be able to answer those kinds of questions, and it's our job to help him or her develop a philanthropic program that reflects their values and beliefs.

PND: In your work, you place considerable emphasis on helping clients become effective philanthropists. What are the hallmarks of effective philanthropy?

MB: For us, effective philanthropy means that a donor has thought through the end results he or she would like to achieve and how they plan to get there. That's what we mean we say "fund the solution, not the problem." Let me give you an example. A lot of people are interested in ending poverty. Some people think the key to ending poverty lies in economic empowerment programs such as microcredit financing initiatives. Others think the key to ending poverty is education. Now, those are both terrific answers to the problem of poverty, and very few people would say one is right and the other is wrong. But rather than just focusing on the problem and looking around for organizations that work to end poverty, an effective philanthropist will ask, What approach to ending poverty makes the most sense to me? Which organizations have adopted that approach, or one like it? Which organizations within that group are doing work that already demonstrates some effectiveness? In my opinion, some people jump too quickly from fixing on an abstract noun like education or poverty to choosing a specific organization to fund, without ever really developing a sense of what their options are.

PND: Does effectiveness imply a certain level of "engagement," in the sense that venture philanthropists use that word?

MB: At a minimum, donors need to be engaged in a thoughtful process. Whether they participate personally or not is up to them. For many donors, anonymity is a moral issue, and the anonymous donor can be just as effective, in my view, as the philanthropist who is hands on and out front. But, again, the important point is that donors need to be engaged in thinking through their choices. It's worth putting some thought into understanding how much time you want to, and can, devote to your giving; to how you'd like to spend that time; to what resources besides money you can and want to commit; and to how you will know whether you're achieving your goals.

PND: Are the high-net-worth individuals who come to you for help better informed about philanthropy and their philanthropic choices than their parents and grandparents were?

MB: Thanks to cable television and the Internet, all of us are better informed than our parents and grandparents were. But we're often better informed in a superficial way, by which I mean that while we have access to a great deal more information, we don't necessarily have access to a great deal more meaning. Without a framework to structure the information, it's just a barrage of anecdotes — about problems, solutions, great work, or terrible waste. Intimidation and inertia are often the results.

PND: The number of foundations and nonprofit organizations has increased dramatically over the last twenty years. In the same way that information overload contributes to ever shorter attention spans, has the effectiveness of the nonprofit sector been hampered by the disaggregation of philanthropic assets among so many different organizations and types of charitable vehicles?

The reason we see disaggregation of [philanthropic] resources is because people continue to grapple with how to frame the problems philanthropy is trying to solve....

MB: If we had absolute, definitive proof that there was a right size for a grantmaking or philanthropic vehicle, as well as absolute, definitive proof about the most successful approaches to solving problems on the grantee side, then I think we'd start to see more concentration of philanthropic resources. The reason we see disaggregation of those resources, in my view, is because people continue to grapple with how to frame the issues and problems philanthropy is trying to solve, as well as how to assess the impact of those dollars.

PND: Are the tools we use to assess the impact of those dollars useful, or do we need to develop new ones?

MB: Although there's great work being done on this topic now, it's just not enough for the size of the nonprofit sector around the world. Think of what the business sector has: graduate schools of business filled with faculty doing research; independent research institutes; consultants who also publish; industry and trade associations that produce studies on improving performance. The public sector has a small fraction of that level of resources devoted to understanding how government is effective. And the nonprofit sector has a small fraction of the small fraction that the public sector has. So it's no wonder we have scarcely any good ways to identify or to replicate successful nonprofit initiatives. Our sector needs a real twenty-year plan to create and maintain the institutions that will have the scale and scope to answer basic questions objectively about outcomes.

PND: One of the more significant developments in the field over the last decade has been the emergence and growth of charitable gift funds. Have those funds been a plus for philanthropy?

MB: Sure. They've made it easy for many Americans to get more involved in philanthropy and charitable giving than they would have otherwise. They're a very effective, efficient charitable vehicle for many, many people.

PND: Should they be subject to greater regulation?

MB: I think the entire charitable sector needs to be more accountable than it has been, and that's true of all kinds of philanthropic vehicles. We need more of the transparency and accountability that have been demanded of the business sector in recent years. Which is not to say that one particular type of philanthropic vehicle is ipso facto better than another.

PND: Why have foundations and nonprofits received so much scrutiny, from both Congress and the media, over the last few years?

There's...a great deal of attention on philanthropy now because there's a great deal of hope riding on it...."

MB: Well, first of all, the not-for-profit sector is much larger than it ever has been. In fact, I believe it's the sixth-largest industry in the United States. When you're that big, people pay attention to you. But there's also a great deal of attention on philanthropy now because there's a great deal of hope riding on it. People believe — and we should take this as a vote of confidence in the work we do — that philanthropy has the potential to ameliorate some truly pernicious problems. When those hopes are disappointed, people become a little frustrated.

PND: Is that scrutiny likely to result in more regulation of the sector?

MB: I don't know if it will manifest itself in regulatory change. I think it will manifest itself, one way or another, in a higher set of standards and expectations around accountability and transparency, and that's a good thing.

PND: What does American philanthropy do well?

MB: American philanthropy is especially good at funding a diversity of organizations and approaches. It's especially good at responding quickly. And it's pretty good at institution building. We seem to have a fundamental belief that nonprofits play an important role — separate and distinct from government's role. And that's true regardless of whether you talk to liberal or conservative Americans. There's a strong link for Americans between the entrepreneurial spirit in the for-profit and nonprofit sectors.

PND: What could it do better?

MB: It could do better on the institution-building side — we may have created more now than our system can bear. It could do better in terms of focusing on the sustainability of the organizations it supports. We could be smarter about understanding what kind of operating costs are needed to run and report on superlative programs, instead of just looking to fund only "program activities." That's a kind of cost-shifting in the end. And, as I've said, it could do better in terms of funding solutions, not just problems.

PND: Does it take as many risks as it should?

MB: I think individual donors take risks all the time. Private philanthropy is often remarkably bold and creative, and many individuals — especially individuals with the kinds of business backgrounds that many of the newer philanthropists have — are very comfortable with the idea of risk. At the same time, they tend to be careful about having a working theory of change before they take a risk.

PND: Does risk-taking correlate to age? By that I mean, are younger donors more likely to fund something that's really out there than an older donor?

MB: Our experience at Rockefeller Philanthropy Advisors suggests that risk-taking correlates with two things. First is a person's general approach to life — his or her personality, philosophy, and mindset. That's fairly stable over time. Second is the amount of time or resources a person has to devote to their funding. When you're informed, you're taking risk in a fundamentally different way. Taking risk doesn't have to be the same thing as acting on blind faith.

PND: Obviously, the notion of legacy is important in American philanthropy. How do you respond to those who argue that, given the pressing nature of challenges we face at the beginning of the 21st century, philanthropy should be more focused on addressing short-term needs and problems?

The jury is still out about whether more focus on the short-term would help to bring about the kind of social change most of us would like to see....

MB: I think the jury is still out about whether more focus on the short-term would help to bring about the kind of social change most of us would like to see. There are no hard and fast answers as to whether it is better to be endowing foundations in perpetuity or using those resources up front. There are advantages and disadvantages to both approaches, and very little in the way of rigorous proof to support either point of view. Ultimately, I think it's a matter of personal choice and assessment as to how one uses one's philanthropic resources.

PND: What seems to drive the high-net-worth individuals who come to Rockefeller Philanthropy Advisors for assistance?

MB: I would say there are two drivers acting on our clients today: one is a hunger for effectiveness, and the other is a strong desire to forge a deep and ongoing family involvement in philanthropy.

PND: Do gender and culture affect the way a donor approaches his or her philanthropy?

MB: Absolutely. People have different experiences in life that have a huge impact on the way they view the world. For example, we often find that women are more focused on the family implications of philanthropy. Similarly, different ethnic and nationality-based cultures often have their own traditions of giving, and those traditions often are reflected in an individual or family's philanthropic choices.

PND: When you look out over the philanthropic landscape, do you see anything that really excites you?

MB: I find some of the experiments in social entrepreneurship, where you may have a nonprofit that's using business tools or a for-profit that has embraced a social purpose, to be interesting. In fact, I think we should be encouraging more experiments that combine the best aspects of the for-profit sector with the best aspects of the not-for-profit sector. I think that would be fantastic.

PND: The Republican-controlled Congress has been flirting with permanent repeal of the estate tax for a while now. Do you think that's likely to happen? And, if it did come to pass, what would be its impact on philanthropy?

MB: You know, that's a social experiment that has never been run in the United States. And the estimates of the impact vary tremendously, so I would say we simply have to wait and see what happens. The tax code clearly motivates people's behavior, but there are many people of wealth who have decided it's not helpful to succeeding generations to pass on everything. And there are also many donors who see philanthropy as a way to help shape the kind of world they want to live in.

PND: If John D. Rockefeller were alive today, what do you think he'd say about the state of American philanthropy?

MB: I think he would be encouraging more people to think wholesale, as he would put it, when it comes to philanthropy. I also think he'd be pleased to see many of the institutions that he was personally involved with still thriving — institutions like Spelman College, the University of Chicago, and Rockefeller University. Mr. Rockefeller was a huge believer in institutions and in defining institutional success in terms of longevity and sustainability. On that score, I think he'd be thrilled by what his philanthropy has accomplished.

PND: Philanthropically speaking, will we ever see the likes of a John D. Rockefeller or Andrew Carnegie again?

MB: We're already seeing their likes. Think of just a handful of the new philanthropic or social investment initiatives: the Gates Foundation, Ted Turner's commitment to the UN, the Omidyar Network, And over the coming decades we'll also see the likes of Carnegie and Rockefeller in Europe, India, Russia, and China. Philanthropy truly is becoming a global phenomenon, and that's a very good thing.

PND: Well, thank you for speaking with us.

MB: My pleasure.

Mitch Nauffts, PND's editorial director, spoke with Melissa Berman in March. For more information on the Newsmakers series, contact Mitch at