Tom Tierney is a recognized leader in serving the nonprofit sector. In 1999, he co-founded The Bridgespan Group, an independent, nonprofit organization that collaborates with mission-driven leaders and organizations to help accelerate social impact. During 2000, he stepped down as Bain & Company's chief executive to concentrate on Bridgespan-related activities.
Tom frequently speaks and writes on a variety of topics related to nonprofit leadership and philanthropy. He lectures at Harvard Business School and the Stanford University Graduate School of Business and chairs the Harvard Business School Initiative on Social Enterprise. He has contributed to numerous case studies and publications, including Harvard Business Review and Stanford Social Innovation Review. He also contributed chapters to the Leader to Leader Institute's Leader of the Future and Indiana University Press's Taking Philanthropy Seriously and has been featured in articles on philanthropy in the New York Times and the Financial Times. He has been profiled in various publications, including Learning from the CEO and Finishing Well. He also co-authored a popular book about organization and strategy titled, Aligning the Stars, which was published in April 2002 by Harvard Business School Press. In 2009, Tom was named as one of the Nonprofit Times Power and Influence Top 50. He recently co-authored with Joel L. Fleishman Give Smart: Philanthropy That Gets Results, which was published in March 2011 by Public Affairs. In 2012 Tom led the production of "Conversations with Remarkable Givers," a groundbreaking, free video series, housed on GiveSmart.org, of candid conversations with a range of extraordinary philanthropists.
Tom joined Bain & Company in 1980 following graduation from Harvard Business School, where he received his MBA with distinction. He was promoted to partner after three years and from 1987 to 1992 served as the managing director of Bain's San Francisco office. In 1992, he became Bain's chief executive. During the 1990s, under his leadership, Bain & Company grew its revenues six-fold, while significantly expanding its international operations.
A native of California, he received his BA in Economics with highest distinction from the University of California at Davis, where he was honored as that year's most outstanding graduate. He served as a field engineer for Bechtel International in North Africa before entering business school.
Tom is a director of eBay, Inc., and also serves on a number of nonprofit boards and advisory groups, including the National Board of The Nature Conservancy, the Hoover Institution, and the Woods Hole Oceanographic Institution. He is a past director of many other nonprofit organizations, including The National Center for Public Policy and Higher Education, United Way of the Bay Area, United Way of Massachusetts Bay, the Committee for Economic Development, Catholic Charities, WGBH, and The National Academies.
Ann Paisley Chandler: What inspired you to write Give Smart? And how does it relate to your work at The Bridgespan Group?
Tom Tierney: Both Joel Fleishman and I perceived a need in the field of philanthropy alongside an opportunity for society. The need and the opportunity are being driven by the trend we are seeing of more people giving more money away in bigger chunks during their lifetime. And those people are not interested just in what might be thought of as traditional charity. They are also interested in problem solving. So we have more philanthropists more actively engaged in their philanthropy and aiming for results, which is great. The complication is it's really hard to solve problems, such as environmental degradation, or reducing the dropout rate in inner city schools, or providing a healthy start for young children.
For the book, Joel and I drew on his experience in the foundation world and The Bridgespan Group's work with philanthropists and foundations. We identified some patterns that emerged from successful philanthropic initiatives. One of our key findings was that philanthropists who were achieving results had confronted tough questions like: What am I trying to achieve? What is success? And how in the world am I going to achieve that success?
Our aim in writing the book therefore was to help philanthropists confront the essential questions needed to improve their chances of achieving the results they seek. Hundreds of billions--really trillions--of dollars will flow into philanthropy over the next decade or two. If that money can improve its impact on society by even just 1 or 2 percent, the potential is massive. While Joel and I cannot begin to claim that our book alone can improve philanthropy across the board, for some people, it is improving their probability of success. So the opportunity is that more social problems are solved more effectively, that more disadvantaged populations are served in a better way.
Bridgespan was founded on the premise of delivering better results to society by helping both philanthropists and the nonprofit organizations they work with to improve performance. The "bridge" in Bridgespan is about connecting or bridging the sources of capital with the users of capital all the way down to the ultimate beneficiaries. And that's been a unique and really important approach in generating results.
The content and ideas embedded in Give Smart grew out of not just Joel's prior work but also Bridgespan's field-based projects, of which at this point there are hundreds. We're both philanthropists, if you will, upstream and downstream with NGO's and beneficiaries. Give Smart was a natural extension of what we were learning.
Chandler: What are you seeing as the philanthropic trends today?
Tierney: There are a handful of really important philanthropic trends. The first is characterized by the phrase "giving while living." More people, especially very wealthy people, are intending to give their wealth away during their lifetimes rather than establish foundations in perpetuity. This can be done, for example, through sunsetting a foundation.
Bill and Melinda Gates have a 20-year sunset provision, which means that after the last one of them passes the foundation will only exist for another 20 years. Clearly, philanthropy is no longer just a retirement activity. People like Pierre Omidyar and Jeff Skoll started aggressively pursuing philanthropy in their 30s and 40s, which gives them four, five, or six decades of active engagement.
The second trend is these philanthropists are heavily, directly engaged in their philanthropy. They are spending money, but they are also investing time. That is important because the nonfinancial contributions made by philanthropists--their leadership or exertion of influence--can be as important as their financial contributions. Think of Harlem Children's Zone, which has been a nonprofit success story, and the role Stan Druckenmiller has played. His leadership, his influence, his mentorship, his ability to help raise additional funds for that organization, all of those things have been just as valuable as his financial contribution.
The third trend I'd note is the focus on results. When Bridgespan launched 14 years ago, the notion that philanthropy was aimed as an investment toward impact was still pretty new. It's not that people didn't care about results, but results weren't the driving factor. People didn't talk much about measurement and the phrase "social return on investment" didn't even exist. The current emphasis on results is a natural extension of people being more engaged and giving away their wealth during their lifetimes.
I'd say one of the ways people and organizations are achieving results is by scaling what works, another powerful trend. There are dozens of programs like those run by Harlem Children's Zone, or Nurse Family Partnership we could point to that really do work at helping to address social problems and are scaling those efforts. Ten years ago you didn't see philanthropists investing in building the capacity of organizations to be better managed and to develop and implement more thoughtful strategies. They are now. The growth and expansion of Bridgespan is actually a consequence of this trend.
The last trend that I'd highlight, which is a natural consequence of these others, is massive innovation. Whether you think about the phrase "social return on investment" or "social entrepreneur" or "venture philanthropy" or "impact investing", none of these things existed 15 years ago. And these ideas are not just being driven by technology, although that's important. Instead they are being driven by entrepreneurial people, both philanthropists and social entrepreneurs, who are trying to figure out better and better ways of getting things done. The American entrepreneurial spirit increasingly is being applied to philanthropy to solve social problems.
Chandler: What was the writing process for you and Joel Fleishman?
Tierney: First of all, Joel and I are really close. Joel was the President of Atlantic Philanthropies when we launched Bridgespan, and Atlantic was Bridgespan's anchor funder. It's fair to say that Bridgespan wouldn't exist today without Atlantic Philanthropies. Joel has been a mentor and a coach for me for around 15 years, so the writing process was pretty straightforward. Joel had, at that time, recently published a terrific book called The Foundation, which was accompanied by a case book of a hundred cases of successful philanthropy. I approached him after that book had been published with the idea of building on his intellectual property, Bridgespan's intellectual property, Bridgespan's extensive field work, and writing a book that was aimed not at foundations' staff or institutions, but rather at individuals who were trying to figure out how to get more impact with their money.
The agreement was that we'd combine our efforts: I would work with Nan Stone, who is a fabulous editor and was the head of Bridgespan's knowledge efforts at the time. Nan and I would collaborate to actually write drafts and then Joel's role was to provide feedback and editorial comment on those drafts. I spent the better part of 18 months working with Nan writing draft after draft, and Joel was an active participant in that process as an editor and key thinker.
I should also say that there were a number of other Bridgespan people involved as readers and contributors to the process. It was, as these things always are, a labor of love. You naturally underestimate the effort required, and in fact, the shorter the book and the tighter the writing, the more effort required. Even identifying the right six questions took months. We also had 60 or 70 external readers who ran the gamut from social sector leaders to philanthropists to academics and so forth participate in various ways throughout the process and that turned out to be really useful.
Chandler: You have said that philanthropy's natural state is underperformance. What do you mean by that and what are the implications of that?
Tierney: The phrase that philanthropy's natural state is underperformance actually caught the media's attention when we published the book, and they asked the same question. What we mean is that philanthropy could achieve higher impact on average that it currently does. Now, why do we think that? Well, first of all, there are no "market forces" that influence philanthropy. Whether a donor achieves great results or mediocre results, there's no consequence. Conversely, in private business, if you perform poorly, it shows up on your financials and eventually you will go out of business. In public service if you perform poorly you won't get re-elected. In philanthropy however, there are no consequences to mediocrity. It's a little bit like the proverbial Lake Wobegon where everybody is above average. When you give money away, people say good things about you, at least to your face. And it's very hard to find philanthropists who say, "You know what, I'm really not doing well in my philanthropy." So the natural state is underperformance because there are no feedback mechanisms to incent people toward better performance.
As a result, in philanthropy excellence is self-imposed. If you really want to achieve better results with your philanthropy, you have to set out to do that on your own. It's kind of like exercise. The doctor can say you need to exercise, people can say you need to exercise, but at the end of the day, you have to decide to exercise. Similarly, if you want to be really effective with your philanthropy, you have to make that decision. But it is really hard. It is hard to change lives; it is hard to solve social problems. Having now spent almost 15 years in the social sector after a couple of decades in private business, I know it is way harder to put money to work to solve social problems than it is to put money to work to make money.
It's harder because strategies are more complex. It's harder because measuring how you're doing is more complex. It's harder because you're almost always collaborating, working with and through other organizations whether they are nonprofits, other philanthropists, or government agencies. In sum, the absence of market forces, the absence of feedback loops, the fact that excellence must be self-imposed, and the reality of just getting things done in society all combine to make the natural state of philanthropy underperformance.
Chandler: There is a chapter in the book that addresses how donors should work with grantees. Can you identify some steps that grantees need to take as well to help create a real partnership?
Tierney: The fundamental reality of the donor-grantee relationship is the gargantuan power imbalance. As that old saying about the golden rule goes: people who have the gold make the rules. For better or worse, and I think generally worse, that is often the case in philanthropy. The people with the money have a disproportionate amount of power over those who need the money to run their nonprofits to serve their beneficiaries. Some donors are very thoughtful, careful, and caring about negotiating that dynamic and others are a lot less so. Some donors are humble and learn and really do want to collaborate. Others are arrogant and think they have all the answers, even when they don't.
And so, while it may sound ridiculous at first blush because your organization is strapped for money, and you don't want to turn away money, the first imperative for a grantee is to choose donors carefully. If you start receiving large grants from donors with whom you do not share goals or values, you're just asking for trouble. It is better to be disciplined and thoughtful about the kind of donors that are going to be the best donors for you. There is something we call the cost of capital. And the high cost of capital occurs when the donor is asking the grantee for all kinds of reports and paperwork, much of which does not even get read. Or the donor may string you along for a long time without making grant decisions. It is important to be strategic and disciplined about whether the cost is worth it.
The second imperative is around communication. It is important for the grantee to be as open, honest, and direct as possible. Bringing a point of view about what's right and wrong to the relationship matters because donors can't read minds. If the grantees aren't willing to say, "You know what, this really didn't work." Or if the grantees are just smiling and saying, "Yes, whatever you want we'll do," even if it is not aligned with the organization's mission, that's a recipe for problems. So nonprofits should be thoughtful about choosing donors and working with them in as constructive a way as possible, which has at its bedrock effective communication.
Chandler: A few years ago, you published a paper about how the nonprofit sector had a difficult time filling nonprogram-related leadership positions, what you called the "leadership deficit." Have you seen funders take action to help their grantees overcome the leadership deficit, and if so how?
Tierney: The leadership deficit remains an enormous challenge for the social sector. That's both in the quantity of leaders that are needed and the quality of leaders required. Jeff Bradach, my Bridgespan cofounder, wrote a paper several years ago describing how nonprofits tend to be strongly led and undermanaged. That's where the leadership deficit is the most acute--in bringing enhanced management capacity into nonprofit organizations.
Jim Collins in his books Good to Great and Built to Last and in his monograph talks about level-five leadership and the importance of the right people being "on the bus in the right seats." Not only is the leadership deficit real, the imperative to address it is probably the most important imperative in the social sector. One cannot achieve "A" level results with a "B" level team or a team that is not fully staffed. How have funders responded? I say the good news is that at the margin, more and more funders are willing to invest in capacity building, and that is the key. Donors have to be willing to fund what we called "good overhead." That includes funding a chief operating officer where it's warranted, funding adequate systems, and funding the right level of compensation for key employees.
In the social sector we often think about overhead as being bad. And of course wasting money is bad. But it is not a waste to invest in building the capacity of organizations. You cannot have it both ways. You can't starve the organization and at the same time expect it to deliver outstanding results, as we describe in detail in an article titled "The Nonprofit Starvation Cycle." Unfortunately, many philanthropists are still too preoccupied with somewhat arbitrary overhead rates, and they apply a simpleminded and deeply flawed notion that less overhead is always better. If people applied that notion to their daily lives, they would buy automobiles with no airbags because they are cheaper. But cheaper is not necessarily better. Better is better. And you're not going to achieve outstanding results, nor will you truly solve social problems, without investing in the capacity to do so.
Chandler: Having completed the book, the Conversations with Remarkable Givers video series, and given your current work with philanthropists, what is your advice to those getting started on their philanthropic journey?
Tierney: Give Smart is part of a much broader program at Bridgespan around advancing philanthropy, which includes our work with individual philanthropists, our www.GiveSmart.org website, the Conversations with Remarkable Givers, and additional research and articles. The advice I would give a new philanthropist is very similar to the advice we heard from our video series interviewees. When we asked them what advice they had for new philanthropists, nearly all said, "Don't wait." If you are inclined toward philanthropy, get involved now. Doing philanthropy well requires a lot of learning, and the more practice you get, the better you will be.
Second, orient your philanthropy around achieving results. There are a lot of reasons to give money away: you give back to your community; it makes you feel good; and you give to institutions that you are a part of, such as your university, your church, or your synagogue. All of those things are just fine. But for some part of your philanthropy, ask yourself, "What can I do to help solve social problems?" And if you orient your philanthropy around results, you will inevitably end up confronting tough questions, like, what actually is success? And how am I going to achieve it? Am I getting better in my philanthropy over time? These are the questions embedded in Give Smart. If you tackle them head on, it will provide a greater opportunity for you to achieve results.
Finally, just have fun. Every philanthropist we've worked with, interviewed, and researched all say that it brings them great fulfillment to be of service to others. The old saying, it's better to give than to receive, isn't just a hackneyed saying. Lending a hand to help solve problems in a collaborative results-oriented way will bring you phenomenal joy.
Philanthropy NYU, where this post first appeared.