When You've Made Enough to Make a Difference

Many philanthropists have big ambitions, but even the richest individuals and largest foundations don't have enough money to end poverty, reverse climate change, or cure cancer. And many donors impose substantial costs on their grantees by, for instance, becoming excessively involved in program design or imposing burdensome reporting requirements. To achieve breakthroughs, donors need a multiplier effect-an approach that delivers many dollars' worth of impact for each dollar invested. In short, they need an investment model. To develop a sound model for philanthropy, donors must understand the methods of change that breakthrough results require. These include building robust nonprofit organizations, modifying public policy, establishing intermediaries, and facilitating research. The Draper Richards Foundation, for example, helps direct-service nonprofits build their capacity and capabilities; the James Irvine Foundation created an intermediary organization to improve high school education in California. Donors must also understand how they can best support those efforts-through the roles they play, the resources they devote, and the relationships they develop. Michael J. Fox, for instance, has used his celebrity and credibility in his foundation's efforts to cure Parkinson's disease. Developing a clear investment model doesn't have to be complicated or expensive, just deliberate. Without one, donors risk adding little value and imposing steep costs.

• Nonprofit organizations
• Accounting
• Strategy