Theory of Change
Use this philosophy to shape your giving
By Kate Donnelly, CFP
With so many opportunities to give, it’s no wonder many people are searching for more direction.
While disaster relief, school fundraisers and charities favored by family and social networks tend to drive donations, frequent requests can leave people feeling stretched, spending too much energy responding to requests and, feeling a sense of obligation, having a tough time saying no.
But those seeking greater impact can take a more strategic approach, one that can guide both experienced and emerging philanthropists with a structured plan.
The approach is called a theory of change and, while well known among nonprofits, it’s less frequently employed by individuals. Essentially, a theory of change is a methodology for planning by which you clearly define the resources and outcomes required to effect change.
A personal theory of change asks you to start with a big picture view of the difference you want to see in the world before deciding the steps you’ll take and the contributions you’ll make to achieve it. It has you work backwards from goals to outcomes to inputs – your financial contributions, as well as time, technical skills, social connections and other resources – so that you’re drawing direct connections between the change you want to affect with the real-world interventions necessary to make it possible. Finally, creating a diagram of these connections can serve as a map for your decision-making and action steps.
This may feel different – and maybe even too aspirational – but doing so can provide a framework for giving that uncovers opportunities for collaboration, impact measurement, and comprehensive planning.
Creating a theory of change offers many benefits. It enables greater clarity to focus your giving. It can help you partner with organizations whose mission and programs match your goals. And it can help turn your network into collaborators for change. When you’re clear on what you’re trying to accomplish, you’re putting others in a better position to help.
From a financial planning perspective, a clear theory of change can help your financial, tax, estate planning and philanthropic advisors figure out the most effective giving vehicles for philanthropy, from cash donations to using donor advised funds for 501c(3) giving versus a family LLC for 501c(4) donations, or focusing a family foundation on grantmaking and impact investing that map to the goal. Detailed knowledge of your intentions could even affect the way estate planners craft your planned giving and terms of estates and trusts.
Theories of change can also bring personal connections together for collective action. For example, in my work I sometimes see philanthropic families with differing views between generations about which issues or causes are most important. By using theories of change, families may see that goals that appear different on the surface actually offer opportunities to collaborate on the interventions they can collectively employ.
For example, a grandmother’s goal may be providing basic societal needs while her grandson’s is centered on increasing educational opportunities. But, after sharing their personal theories of change with each other, they agree that helping people find stable housing is an outcome that supports both goals and, seeing that alignment, they can collaborate to support development of affordable housing. If the family has a foundation, they may also focus the foundation’s grantmaking on related issues and use its investable assets to make direct investments – impact investments – into affordable housing developments. By identifying grant and investment capital as resources in their theory of change, impact investments can be aligned to the overall goal and generate a long-term financial return that can be used to further the philanthropic aims.
Finally, developing a personal theory of change can help you justify continuing to give to some organizations or saying no to new asks. After developing your plan, you may find that some of the organizations to which you’ve historically given fit your goals while others don’t. Rather than feeling bad for turning down a new donation request or invitation to a fundraiser, you can rely on the clarity and conviction you’ve built into your theory of change to say that, regardless of how important the charity is, it simply doesn’t fit into your areas of focus.
Importantly, a theory of change doesn’t have to stop you from giving to organizations that don’t fit squarely within it. In fact, you can carve out a piece of your giving strategy with a budget dedicated to school fundraisers, your colleague’s favorite charity or disaster relief efforts. We’re all part of communities that we want to support.
The point is that a personal theory of change can anchor your giving by helping you prioritize, measure and redirect your giving when needed. It takes work. But taking control of your giving plan makes it worth the effort.
Kate Donnelly is a CERTIFIED FINANCIAL PLANNER™ and adviser at Laird Norton Wealth Management. She can be reached at email@example.com
This column was originally published in the Nov/Dec 2022 issue of Seattle Magazine. www.seattlemag.com.