This article closely examines and critiques the related phenomena of philanthrocapitalism and strategic grantmaking, which are profoundly changing the operation of the nonprofit sector in subtle but very significant ways. From both theoretical and empirical perspectives the article reveals the subtle but very serious negative consequences of these highly touted new approaches.

“[P]hilanthrocapitalism seeks to improve the practice of philanthropy through the application of techniques common to for-profit businesses.” These techniques includes an emphasis on efficiency, performance metrics, and strategy. Garry documents how a movement that began with a few high profile billionaires moving into philanthropy has spread to foundations with a number of profound effects on nonprofits. Foundations have moved to making fewer and larger grants, have placed much greater limits on what grants can be used for and have shown an increasing tendency (documented in the article’s original research) towards “proactive grantmaking,” in which the foundation initiates the idea and the grantee carries it out. Garry analyzes how these changes may damage nonprofits. For example, the emphasis on metrics fails to understand the desirable social outcomes sought by nonprofits may be less easily measured than “profit” in business, and may create perverse incentives for grantees while stifling innovation. Another example: the “top-down” approach of proactive grantmaking substitutes the judgment of the on-the-ground charities and nonprofits about what to try and what will work with the one-size-fits-all and often less expert views of the grantors. The article takes care to acknowledge the potential advantages of the new approach, but raises very important red flags about critical shifts that, once identified and documented by Garry, will be readily visible to anyone working in the field.

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