Misguided frugality can quickly sink your philanthropic ship.

As philanthropists you want to be good caretakers of your charitable wealth. You want your assets to grow and costs to be reduced, so there’s more money to help people.

This seems reasonable, right? The trouble is, in our altruistic effort to be frugal, we often hold back on investment in important things like strategy development, talent, research, evaluation, technology, relationship-building, and even personal learning.

Funders often hold back investment in grantees, too. They do this by setting arbitrary limits on how much money can be spent on nonprofit overhead. Or by insisting on evaluation results without funding the cost of evaluation.

Philanthropists genuinely want their giving to change the world. But they’re under the delusion that saving leads to impact, and they’re unaware of the damage caused by their thrift. These delusional thoughts about frugality can be destructive.

This type of destructive frugality happens to all types of philanthropists. Fabulous, super-smart, and well-intentioned leaders. Funders who are committed to social change and justice. People who have dedicated their lives to helping others. People just like you.

Does this sound familiar? A nonprofit requested a three-year policy advocacy grant from a donor to advance an innovative approach to drug treatment. The donor, however, authorized a grant of only one year, believing this was the fiscally responsible thing to do. But, as you know, influencing public policy can require consistent effort over the course of years. These efforts include conducting research, raising public awareness, organizing residents, educating the media and meeting with policymakers. These efforts take time.

Because the program lacked a realistic three-year funding commitment, its CEO couldn’t hire top talent. The experienced person she wanted wouldn’t leave her current job and risk her family’s financial security for a one-year gig. So the CEO hired someone less experienced.

While the donor saved money up front, but she did so at the cost of talent and program expansion. She saved money on the wrong things. She was under the delusion that she was being a good steward of her philanthropic assets by tightly doling out funds in one-year increments. Instead, she was getting in her own way.

So, why does this happen? Part of the spell of delusional altruism is a scarcity mindset. Yes, you heard that right. Despite access to wealth, philanthropists live and work with a scarcity mentality.

A scarcity mindset is the misguided belief that maintaining a spartan operation delivers more value. It’s a belief that, by not investing in their own capacity, talent, research, learning, strategy, technology, effectiveness and infrastructure (or that of their grantees), funders can allocate more money to the causes they support and therefore achieve greater impact.

Surprisingly, the scarcity mindset has little to do with money. It has everything to do with belief.

Scarcity-minded funders believe that investment in their own operation is only warranted when the need is urgent. They limit their opportunities based on current capacity, not potential impact. Improvements they make, therefore, are only incremental. They feel they should always do more with less. In fact, they often believe they don’t deserve what’s best, fastest or most efficient.

I believe this scarcity mentality is one of philanthropy’s most detrimental self-created limitations.

Why does it take root? There are several reasons.

Let’s Talk About Mindset First

A scarcity mindset is the lens through which many donors view their philanthropy. It’s important to understand that this is a belief system. It leads philanthropists into believing that they are saving money. They believe that less invested in talent, infrastructure and knowledge means more to help others.

But this is wrong. And it plays out in a lot of ways.

For example, too often philanthropists feel they don’t deserve to … fill in the blank: invest in themselves, retain an executive coach, fund a needs assessment, attend a conference, improve technology resources, hire top talent, spend time learning, share their accomplishments publicly, learn how they can advocate for policy change or fund an evaluation.

Why? Because they have a misguided belief that all of their money should go to “help others.”

This belief might appear noble. But in reality, it’s delusional. To have the greatest impact, you need to be the best philanthropist you can be. This requires time and resources to understand ourselves, to understand the issues and communities concerned, to understand the historical and current context in which we are operating, and to build philanthropic muscle and know-how.

Here’s an example. One donor’s philanthropic assets were about to quadruple because of the sale of a business. Instinctively, he knew to prepare for this by clarifying his philanthropic strategy. A revised strategy would allow him to articulate his charitable goals and align his team, operations and funding to achieve them. But he resisted investing in a strategy consultant to help him. He felt all his funds should be donated to charity. Fast-forward several years, and his foundation was still floundering. He couldn’t articulate his strategy. While he was giving grants to many nonprofits, his funding was not achieving the impact he desired.

To help other people, you first need to help yourself.

Now Let’s Look At Lack Of Investment In People

The second way the scarcity mindset manifests itself is in the lack of investment in people.

Philanthropy is comprised of people. Donors are people. Family offices are run by people. Foundations are nonprofit organizations staffed by people. When we need advice, we retain people. And the people we want to help are, of course, people!

Given philanthropy’s people-centeredness, the lack of its investment in people is stunning.

By investing, I mean investing in yourself. And the people who help with your giving. This could be your board of directors, employees, the executive director, your kids or your spouse. It could also include your wealth advisors, estate planning attorneys and family office staff. Bring on the best talent to help start, design, grow, manage, assess and scale your philanthropy to achieve maximum impact. Provide them with the resources and support needed to be their best selves and contribute their talents. After all, you want to change the world.

Sadly, many well-intentioned philanthropists don’t invest in people.

Here’s an example. One former professional football player started a nonprofit foundation to give back to his community. He created football camps and tutoring programs to offer opportunities for low-income children to learn a sport, gain teamwork skills, have positive role models and increase their educational opportunities. Although he made significant financial contributions, he knew he needed to raise additional funds to scale and sustain these programs.

But like many of us, he lacked fundraising experience. Yet what did he do? He refused to invest in people. He refused to hire a fundraising consultant or grant writer. Why? Because it would cost money.

You can guess what happened. He was able to maintain great camps and tutoring for a small number of children, but he couldn’t realize his vision of scaling up and helping greater numbers.

These are just two examples of how a scarcity mindset can derail philanthropic impact. The good news is that it doesn’t have to be this way. You can turn things around by embracing a mindset of abundance.

For other examples of a scarcity mindset and how to avoid it, check out my new bookDelusional Altruism: Why Philanthropists Fail To Achieve Change and What They Can Do To Transform Giving! In it you can take the Scarcity Mindset Quiz and see if a scarcity mentality might be holding you back. You’ll also learn the number one cause of a scarcity mindset, AND how to transform your giving by transforming yourself. Pre-order it before March 22 to get a free webinar, keynote, or private consultation with me!

And if you want to discuss these ideas, or feel you could use some help, let me know. As atrusted advisor to philanthropists I have more than 20 years of experience helping ultra-high net worth donors, foundations, wealth advisors, and Fortune 500 companies to get the most impact out of their charitable giving. A little guidance goes a long way, so let’s talk!

A modified version of this article was originally written for and published by Forbes.

© 2020 Kris Putnam-Walkerly. All rights reserved. Permission granted to excerpt or reprint with attribution.

About Kris Putnam-Walkerly

I’m a global philanthropy expert, advisor and award-winning author. I help ultra-high net worth donors, celebrities, foundations and Fortune 500 companies dramatically increase the clarity, speed, impact and joy of their giving. I’m the author of Delusional Altruism: Why Philanthropists Fail to Achieve Change And What They Can Do To Transform GivingandConfident Giving: Sage Advice for Funders, was named one of “America’s Top 25 Philanthropy Speakers”, I write about philanthropy for Forbes.com, Alliance Magazine, De Dikke Blauwe and am frequently quoted in leading publications such as Bloomberg, NPRand WSJ. 

Whether you are just getting started in philanthropy, want to refresh your giving strategy, or need to catapult yourself to your desired future, I can help. Let’s talk! Call me at +1-800-598-2102 x1, email me at kris@putnam-consulting.com or schedule a call.

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