Perpetual Limited is one of Australia’s oldest trustee companies and largest managers of philanthropic funds. The story of how Perpetual refocused its philanthropy business to build non-profit capacity (particularly digital capacity), as opposed to project funding, is nearly 130 years in the making. In this article we look at how that change occurred and the difference it has made to our philanthropy clients and the non-profit organisations they are passionate about.
Re-learning what was always known
In the colony of New South Wales in 1885, a committee of businesspeople gathered in Sydney to form a trustee company. Among them was a man who would one day be the first Prime Minister of Australia, the Honourable Sir Edmund Barton. Perpetual (as it is now known) was born that day with the intention of protecting the wealth, property and families of the men and women who took the arduous months-long trip back to Britain with no guarantee of return.
Within several years, Perpetual had its first official philanthropist. Dame Edith Walker set up a charitable trust to support women who had made their way to colonies in domestic service. Knowing that in their retirement many would not be able to afford to return to Britain and had little or no family in Australia to support them, Dame Edith had cottages built and money set aside to ensure the properties and the women who lived there were always supported.
Dame Edith saw that the needs of the community in the emerging colony were ever-changing, and the trust that she established was deliberately flexible to ensure that there would always be funds to support them. Today, the cottages house women at risk of homelessness. Dame Edith trusted Perpetual to invest her resources prudently and ensure they always met the community’s greatest need.
Since Dame Edith’s day over 1000 Perpetual clients and their families have established charitable trusts and endowments. Perpetual now distributes over $61 million (US equivalent) in grants annually, making it one of the largest distributors of philanthropic funds in the country.
Global approaches to philanthropy have changed greatly over the past 130 years. For Perpetual, however, Dame Edith’s commitment to supporting core costs of service delivery and ensuring flexibility for a changing community has remained an enduring model.
The future of philanthropy
Today Perpetual runs a holistic support program for our philanthropic clients, managing everything from investments to secretariat functionality. We solicit applications for funding from not-for-profit organisations and help our clients make informed decisions on who to support.
About six years ago Perpetual began a process improvement program focused on providing our philanthropy clients with access to the best possible organisations to support.
At the time, Perpetual’s philanthropy team was made up primarily of Trust Managers with expertise in trust governance and compliance. Trying to staff the philanthropy team with expertise applicable to 1000 charitable trusts would have put an unfair fee burden on clients without any guarantee of better outcomes for the client or the community.
Instead, we undertook an international review of best-practice approaches to grant-making, and we talked to non-profits about gaps in need. Given a blank piece of paper to design an approach to philanthropy that would ensure consistency and fairness, the solution we found was startlingly simple.
We faced four main challenges in crafting a new approach to giving. We needed to design:
- An approach that we could implement with Perpetual’s existing staff and skill set
- A process that was cost neutral for clients
- A way to assess applications that was appropriate for the full diversity of organisations within the non-profit sector, from small youth
homelessness services to large biomedical research organisations
- A way to guarantee providing better outcomes for both clients and the community
What we found was that we had all the right staff skillsets and structures to assess the quality of organisations applying. At the same time the feedback we were receiving from non-profit leaders was that they wanted greater freedom to seek support for core organisational costs. We heard time and time again that there were few funders who wanted to fund the “unsexy stuff” – the programs that were not necessarily new or innovative but that were making a genuine difference year in and year out.
It also came through very clearly that funders’ tendency to place restrictive and ad hoc ceilings on administration costs was not just unpopular but a genuine barrier to impact.
At the end of the review process it was clear that if we wanted to build a philanthropy program that provided our clients with the best possible opportunity to have impact, we needed to move away from asking non-profits to submit ‘projects’ for assessment.
A new model: IMPACT Philanthropy
We decided instead to build a philanthropy business that focused on supporting organisations to have impact in their communities. We also knew that our assessment process had to be transparent and replicable and that required us removing assessor biases (conscious or unconscious) from our decision-making process.
The result was an application process with a greater emphasis on organisation capacity, with no written narrative by the assessor and only seven questions, scored from zero to two (zero = no confidence, one = some confidence, two = strong confidence), about the organisation’s strategy, their ability to deliver on their mission, the leadership at the board and organisational level and the outcome-focused culture of the organisation as a whole.
At the end of the assessment process requests with the highest aggregated scores are put in front of our philanthropic clients until all avenues for securing support have been exhausted. Where we use our discretion, we start with the highest ranking applicants and work our way down the list. It’s as simple as that. We’ve called our philanthropy business ‘IMPACT Philanthropy’ – not for any other reason other than the idea of maximising impact being at the centre of how we work.
Funding organizational capacity
Because the assessment is tied to the organisation rather than a project, our clients have become open to funding just about anything, from the CEO’s salary to the legal costs of mergers. Administration ratios and costs are a non-issue. We urge non-profits to ask for what they need to make an impact and don’t presume to believe that looks that same for every organisation.
Since the implementation of the Impact Philanthropy approach our Philanthropy client Managers spend more time talking to our philanthropy clients about trusting non-profit organisations to ask for what they need, rather than setting the agenda for what we think should be funded. Our role is to give our clients confidence that the organisations are well-run so they can make quality decisions, including funding things they don’t necessarily understand.
The past six years have seen many of our clients reshape the way they look at philanthropy. Many see the assessment approach for their social investments as one quite similar to decision making around their personal investments.
Fundraising staff and non-profit leaders have been indoctrinated to match projects to funders. We still get a huge influx of enquiries from non-profit organisations seeking advice on what they should apply for. For many applicants the freedom to apply for whatever they need has been a difficult concept to embrace.
Building digital impact
To further advance our commitment to funding organisational capacity, last year we established the IMPACT Partnership Program. That program gives any organisation who has scored well for three consecutive years in our funding program the opportunity to apply for a grant of over $750,000 (US equivalent) for anything they want. We’ve recently completed our second year of funding with over $7.5 million distributed largely for requests that would be considered ‘core support’. These days, this increasingly means support for digital capacity. Funds have been directed to the development of digital infrastructure, digital data management systems and for Client Relationship Management systems that better capture, manage and protect volunteer and donor data. We’ve also seen:
- The development of a consumer-led health wiki
- Better mobile technology support for nurses working in some of Australia’s most remote communities
- Salaries for staff to design data collection and protection mechanisms for inmates involved in health programs in prisons.
We’re seeing an increase in digital support requests across the board and not necessarily because non-profits are suddenly realising they need to digitally transform. Rather, our philanthropy clients are among a select group that will consistently fund digital projects in all their forms – from post-merger system integrations and project management through to the costs of designing and protecting digital data protocols.
Our clients expect to invest in organisations that are well prepared for the changes in policy and their operating environment that may influence the impact of their work. To that end, our clients are also investing in a three year partnership that will bring Stanford’s Digital Civil Society Lab to Australia to help our non-profit sector engage in the design of the digital civil society. As part of that commitment, at Perpetual we’ve also surveyed the sector to find out where non-profits are in their digital journey and what we’ve found is that digital investment by a large section of non-profit organisations is still restricted to ‘growing revenue’ rather than ‘smarter and better service delivery’. In a sector where funding starvation is a reality for most, it is incumbent on philanthropy to be more open to investing in the digital infrastructure required for our non-profit sector to move away from their analogue roots and that means a greater appetite for investing in core costs.
While the seed of Perpetual’s IMPACT Philanthropy business was planted via a process improvement project, when we shone the light of introspection on our process we came to realise that the ‘how’ in giving is just about as important as the ‘what’.
What we celebrate is that our assessment process puts the power of deciding what funding is required back into the hands of the non-profit organisation rather than with the funder. While some foundations are equipped to use their resources to influence the policy development of the sector they are funding, this is not the role we want or have the expertise to play at Perpetual.
By examining our processes, putting our clients at the centre and keeping their desire to have community impact at the heart of it all, we have aimed to build an organisation that will protect our clients’ legacies for the next 130 years.