Deciding What and When to Contribute

Have you ever wondered why some people give generously while others hold back? What drives the decision-making process of the world's top philanthropists, and how do they determine the right time and amount to contribute?

Philanthropy is evolving beyond sporadic cheque-writing into a long-term, systematic, proactive, and collaborative endeavor. The report on private Indian philanthropy provides a comprehensive look at the strategic considerations philanthropists must navigate.

What to Give?

The decision of what to give is deeply personal and varies among philanthropists. Ramesh Mangaleswaran, Senior Partner Emeritus at McKinsey & Company, highlights the importance of giving wealth, work, and wisdom. He argues that it’s crucial to invest time in philanthropy to avoid passive giving. This sentiment is echoed by GV Prasad, Co-Chairman and Managing Director of Dr. Reddy’s Laboratories, who believes that educating wealth creators on how to think about their wealth is vital for unlocking philanthropic capital.

Philanthropists often prefer to use their liquid assets for giving, such as inflows from salaries, dividends, interest, and other earnings. However, many ultra-high-net-worth individuals (UHNWIs) have their wealth tied up in shares or equity of their businesses, making it challenging to access funds for philanthropy without significant liquidity events like an IPO or a stake sale.

For instance, Fabindia Chairman William Bissell's decision to gift stocks to the artisans working with his organization exemplifies a unique approach to leveraging wealth for social good. By involving the artisan communities in the company's ownership, Bissell aims to create financial sustainability and set a precedent for other businesses.

When to Give?

Timing in philanthropy is just as crucial as the amount and type of contribution. Many philanthropists start with financial support and gradually get involved personally through volunteering or pro bono work. This involvement often follows personal or professional milestones, providing insights into the social sector and helping philanthropists identify their roles in making larger commitments.

A significant number of philanthropists begin their giving journey in their 40s or 50s, coinciding with shifts in priorities and the achievement of financial milestones. However, there is a growing trend of starting early, as emphasized by today’s startup founders and next-generation givers who embrace early giving and involvement. Early engagement in philanthropy allows for more substantial transformations over a lifetime, enabling givers to build networks and establish themselves as influential figures within their communities.

Frameworks for Giving

Philanthropists use various frameworks to manage their financial allocation to philanthropy:

1. Annual Budget for Philanthropy:
An annual giving budget helps philanthropists make consistent contributions throughout the year, balancing their portfolio at the start of the year and earmarking funds for spontaneous philanthropy.

2. Portion of Annual Income or Cash Flow:
Some philanthropists donate a fixed percentage of their income or cash flow, creating a predictable plan that can expand with increasing annual cash flows.

3. Investment Returns:
This approach involves dedicating a percentage of returns from investments to philanthropy, ensuring contributions grow with financial investments.

4. Total Wealth or Assets:
Philanthropists allocate a specific portion of their total wealth to philanthropy, focusing on long-term impact and leveraging accumulated assets for social good.

For example, Dr. K. Ravindranath, Founder of Global Hospitals Group, initially allocated 40% of his assets to his foundation but later decided to dedicate 70% of his current and future wealth, emphasizing the need for a substantial corpus for the foundation.

Conclusion

As we reflect on the intricacies of philanthropic decision-making, we must ask ourselves: Are we making the most of our resources to create a lasting impact? The journey of giving is complex and deeply personal, requiring thoughtful consideration of what and when to give. By starting early and being strategic in their approach, philanthropists can maximize their impact, fostering meaningful change and leaving a legacy of generosity.

How will you decide what to give and when? Are you ready to take the plunge and start your philanthropic journey today?

This exploration into the art of giving reveals that the answers to "What to give?" and "When to give?" are as varied as the philanthropists themselves. However, one thing remains clear: early engagement, strategic planning, and personal involvement are key to making a significant impact. Are we prepared to embrace these principles and elevate our giving to catalyze transformation?