Next Generation Philanthropy

Minnesota is among the most generous states, with a strong reputation for giving. But today’s young donors have different motivations and priorities. As a massive shift of wealth looms on the horizon, local nonprofits may have to work harder to get their hands on the money.

illustrations by JOHN JAY CabuaY, philanthropy, money, giving, saving money, economics, generosity, charity, giving, minnesota

Illustrations by John Jay Cabuay

Back in the days when Minnesota was a rural outpost on the shores of the Mississippi, fortune-seekers came here to build empires. They were Yankees from out east, and they brought with them a certain civic-mindedness, an idea of what a culture should be. As they prospered, and money flowed to them in a torrent, some began to feel the need to give back—if not to their workers, then to the community at large.

A few did this by starting foundations to fund good works around town, including the railroad baron James J. Hill. Others, such as logging magnate T. B. Walker, gave back by starting a museum of their own collections. Still others, most notably George Dayton, contributed by setting aside their company’s profits to be rolled back into the community. In 1909, at a time when most corporations donated less than .05 percent of their profits, Dayton’s Dry Goods earmarked 5 percent of pre-tax profits for philanthropic causes.

Into the 20th century, this ecosystem of giving (corporate, private foundations, and individual donors) continued to evolve. But it wasn’t until after World War II that it began to balloon in size and scope. In 1946, Cowles Media, Piper Jaffray, and other companies also began donating 5 percent of their pre-tax profits to charity as well. Members of the Dayton family, sitting on the boards of General Mills and Honeywell, pushed those companies to give. “What’s good for the community is good for the company,” Ken Dayton (George’s grandson) was quoted as saying.

In 1976, the Greater Minneapolis Chamber of Commerce founded the “5 Percent Club” in an effort to institutionalize the Dayton’s giving policy, with 23 companies signed on. Today this corporate tradition is known as the Keystone Program, with nearly 200 members, about half of which donate 5 percent, and the rest 2 percent. Overall, charitable giving has substantial importance in Minnesota—in 2012, philanthropy accounted for 1.6 billion dollars flowing into the economy.

Those are the broad outlines of Minnesota’s philanthropic history, but details are surprisingly murky for a state that’s always among the most highly ranked in percentage of residents who donate their time and money—with a metro area that John D. Rockefeller III once called an “emerald city of giving.” The Minnesota Historical Society possesses just one slim file folder that holds a handful of newspaper clippings from the 1950s documenting giving in the state. Other than that, there are a few scattered accounts published by foundations on their anniversaries, and one short overview of corporate philanthropy in an essay collection on the state’s culture. That’s why, with support from the Legacy Amendment’s Arts and Cultural Heritage Fund, the Minnesota Council on Foundations recently started an oral history project to collect stories of people who have worked in the field for decades before they, too, are gone.

“Many of the people we interviewed talked about being raised with a sense of community and their ties to it,” says Barbara Sommer, one of the project’s researchers. “That came from all over the state. A lot of them were mentored by people who wanted to make sure there was a giving philosophy and an understanding of the importance of giving personally.”

Donations from individuals still make up 72 percent of total charitable giving today. But there is fear in development circles that such largesse may be declining. In 1997, an organization called the One Percent Club was founded by wealthy individuals who pledged to give 1 percent of their personal income or 5 percent of their own net worth. It grew to have as many as 1,000 influential members (Judson Dayton, Ken’s son, was a longtime board chair) and gave $100 million to charities, but by 2012, due to lack of interest, it was quietly folded into another group.

This and other changes in local philanthropy have provoked concern for its future, given the seismic shift coming in the next 40 years: By the year 2052, according to a study widely circulated in the development community, some $41 trillion will shift from Baby Boomers to Generations X and Y. (Minnesota’s take is estimated to be $48 billion by 2030.) For decades, many local arts groups benefited from the generosity of a few prominent families: Baby Boomers and their parents who developed intense, loyal relationships with particular institutions—Bruce Dayton (Ken’s brother), for example, donated some $80 million to the Minneapolis Institute of Art—and gave with few stipulations about how funds should be used or expectation that its influence would be substantiated. Their children and grandchildren are not following the same script.

“One of the generational shifts our interviewees talked about was the demand for more tangible outcomes,” says Sommer. “Another is tying philanthropy to business interests, like with naming rights. There’s more emphasis on being out front about your giving, of asking ‘How does this benefit us?’ than there was in the past.”

Alyssa Hawkins runs the Minneapolis Foundation’s Fourth Generation program, a group of young philanthropists who pool resources (there’s a $250 minimum contribution) to fund a different social issue each year. She sees similar changes in the expectations of donors in their 20s, 30s, and 40s—an age cohort that recent polling has shown to be generally wary of large institutions. “Our parents were comfortable writing a check to the United Way to distribute that money as they saw fit,” she says. “That’s just not the case for Generation X and Y. There a lot of reasons for that, including that Millenials have been allowed and encouraged to be engaged in everything. They want to have their hands on the work they’re funding.”

According to a study of next-generation donors by the Johnson Center for Philanthropy, young donors see previous generations as “more motivated by a desire for recognition or social requirements,” while they see themselves as focused on impact, first and foremost. “They want impact they can see, and they want to know that their own involvement has contributed to that impact,” the report says.

“Fifty years ago, people would have been happy with a gala, or their name in a program, and wouldn’t look for anything beyond that,” says Anne Paape, 36, who serves on the Guthrie’s Board of Directors. “Younger donors are demanding performance-related information and transparency. They want to see exactly what their money is doing. They want to do site visits and know the impact of their dollars.”

Young donors also have different priorities from past generations. They’re less inclined to give to arts and culture, religious causes, or umbrella groups such as the United Way. Instead, they lean toward animal welfare, the environment, and civil rights. But according to Jason Franklin, who studies philanthropy at the Johnson Center, this change may or may not be permanent.

“If you begin giving on a large scale early, you’re still exploring who you are, where you’re going to live, and what issues you care about,” he says. “So your giving tends to be more exploration and experimentation. What we don’t know is how we will be more like our parents when we get to our parents’ age, and how we will always be different because of generational experience.”

In Minnesota, these worries have been compounded by drops in corporate giving, with the Keystone Program membership having declined about 15 percent since 2007. “The community rallies around the Guthrie year in, year out,” says Danielle St. Germain-Gordon, the Guthrie’s Director of Development. “But the challenge we’ve seen over the past five years is that corporate giving is slowly declining. So we decided to diversify our board, to get younger people who are on the managerial track—on their way up—to get them involved with the Guthrie.”

Their first step in that direction was starting a program known as Open Call, in which young professionals pay a small fee to gain access to a certain number of plays, as well as what the Guthrie’s website calls “world-class socializing,” along with networking in the donor lounge. They also formed a Corporate Council, in essence a junior board made up of what the theater describes as “an exclusive cohort of socially connected, mid-career professionals,” who take an active role in fundraising. With most nonprofit boards, there’s an understanding that members will make personal financial contributions of some nature (buying up the unpopular gala auction items, at minimum). The Guthrie Council’s requirements are explicit: Members must pay or raise $2,500 to join.

Source: 2014 minnesota council on foundations  1-All values adjusted for inflation to 2012 dollars, using the Consumer Price Index.  2-information based on sample data.

These are just some of the new approaches institutions are taking to try to engage young donors, who see their charitable giving as an outgrowth of their personal values. They want to give money, like their parents and grandparents, but also want to have charitable activities more integrated with their lives. Instead of just writing a check and letting the organization take care of the rest, they see themselves as having more to contribute in terms of their time, talent, and skills. That’s why organizations such as the Humane Society are starting groups for young professionals that combine volunteering and donating, like The Pack, which it started in 2015, with regular events affording opportunities for members to help with pet wellness exams in low-income communities or to bring their dogs to happy hours.

Just as younger generations want to be an active part of the stories they are funding, they are looking for a similar type of engagement and personal fulfillment from their work. Their desire to have a job that’s about more than just making money has pushed corporations to be more public about their philanthropic programs.  “Traditionally, corporate giving was seen principally as the responsibility to give back,” says Franklin, “Now it’s increasingly seen as a way to engage employees, retain employees, and even recruit employees by building up that corporate brand.”

Along with these changes, the digital revolution has democratized access to information and networks. It has also made the younger generations more influenced by, and responsive to, their peers. Though e-philanthropy delivers a small percentage of overall dollars, it’s a sector with strong growth. Among the many global crowdfunding sites, locally based GiveMN has seen strong participation from digitally savvy donors. GiveMN’s first Give to the Max Day, in 2009, raised a shocking $14 million in 24 hours. In 2015, it brought in $18 million.

Local nonprofits are also infusing traditional fundraising approaches with the ideals of digital social networks. For example, the Headwaters Foundation, a mid-size private group, created an initiative called the Giving Project Grant, which took 25 (mostly young) people from different racial and economic backgrounds and gave them six months of fundraising training. The group raised $140,000 that was granted to a variety of small groups focused on social and economic justice for minority groups. “This kind of collaborative, peer-to-peer experience is very meaningful to Millennials,” says Alyssa Hawkins, whose Fourth Generation uses a similar “giving circle” model.

But for all the success of these social-network-style campaigns, soliciting small contributions from a large number of casual donors can take a lot more work than courting one loyal, well-off funder. The Giving Project’s $140,000, for example, would barely keep the lights on at the Guthrie, which today operates on a $28 million annual budget. (During the 1970s, when the theater was less well endowed and couldn’t make payroll, it famously sent a staffer over to a board member’s house to interrupt her gardening and return with a check.) But the upside of a more grassroots approach is that groups soliciting the active involvement of a large number of donors experience a broader base of support (and aren’t as reliant on a few individuals whose giving won’t be sustained beyond their lifespans).

Whether Kickstarter and cocktail hour can replace the older, more feudal model of giving remains to be seen. It’s possible that the recent spate of philanthropic megaprojects, including the new Walker and Guthrie buildings, as well as the MIA expansion, were a kind of last gasp of Minnesota’s “greatest generation” of donors. Then again, the next generation is almost always underestimated by the last.

“Everyone wants to look into the crystal ball and know what the world will look like in 20 years,” says Franklin. “But we just don’t know yet whether these changes are generational or chronological.”