Kramer explains the reason why companies need help giving.

Mark Kramer: The idea was that solving social problems is different than solving business problems. It takes strategy, it takes research, it takes careful analysis but it also takes a different set of tools and we saw a lot of terrific tools being developed in the business context to make companies competitive and profitable and successful. We didn’t see a similar set of tools being as widely developed in the nonprofit sector and so we wanted to create a firm that brought the same kind of analysis and strategy and reasoning and research into solving social issues for foundations, for nonprofits and for corporations.

We often deal with funders, charitable funders whether it’s private foundations or corporate foundations or even individual philanthropists and one of the first barriers is the fact that people don’t really expect to solve social problems through their philanthropy. They would like to pick a good cause, a worthy organization, give that organization money and that’s a great thing to do. But there’s a real problem with our nonprofit sector today in this country. We have the most vibrant, most creative largest nonprofit sector in the world and yet, when you look at where the United States stands on social issues on things like education, things like healthcare, things like the environment, we’re at the bottom of the list of developed countries.

So somehow on the one hand we have this wonderful nonprofit sector and on the other hand, we’re not solving the problems that the nonprofit sector is supposed to be solving. So there’s a real basic problem there and we believe the problem really has to do with the behavior of doors, that donors are not expecting or demanding results, they aren’t being realistic and strategic in their giving to actually try and solve the problem.

And without that incentive, nonprofits respond to the way donors think currently, rather than focus in on how can they actually achieve a meaningful impact on an issue.

Question: How do you advise donors?

Mark Kramer: The first thing of course is there may not be an organization that they should choose. I guess the best way to think about it is we did a very interesting engagement for the Gates Foundation and they came to us and they said “We’d like to help encourage more effective philanthropy, not more money, but more effective practices, but we’re not really sure what that means.”

So what does it mean to be effective in philanthropy? They asked us to go out and interview a couple dozen donors, high net worth donors, people who give away at least a million dollars a year, but people who are perceived as being highly effective in their philanthropy. And to be honest, we didn’t think this engagement was going to work because we were talking to all kinds of donors: men, women, young, old, inherited wealth, real estate, new technology all across the country.

But we actually found something very interesting. All of these donors came into philanthropy, they were responding to requests, they were being a good citizen, they didn’t really see any impact for their money. They could give away millions of dollars and nothing seemed to change and they were kind of discouraged. At some point, they came across an issue that had real urgency and real personal significance to them.

So in one case, someone’s son had a rare brain disease and there wasn’t much research. In another case, there was a beautiful theater downtown that was going to be torn down as a development.

What happened was they stopped thinking about how do I give away money and they started thinking about how do I solve a specific problem and it changed completely how they went about things. So instead of saying which charity do I write a check to or so on, they said what would have to happen for this problem to be solved and how can we take responsibility for making those things happen. It’s really this problem-solving approach to philanthropy that we see as the core difference between effective philanthropists and most of the very well meaning, well intentioned people out there who’d given away a lot of money but aren’t really seeing results.

Recorded June 4, 2008.