The role model: MacKenzie Scott
MacKenzie Scott – Trust creates impact
Over 14,000,000,000 US dollars – that is how much MacKenzie Scott has donated to over 1,600 charitable organisations in just a few years. This makes her one of the most generous and unexpected philanthropists in the world. The billionaire has announced that she will donate almost her entire share of the joint fortune with her ex-husband Jeff Bezos, the founder of an online mail-order company.
But it is not only the impressive sum that brings her attention, moreover it is the manner of her donation activity: the selected organisations receive the money without any conditions or earmarking to be used at their disposal.
Trust-based philanthropy as a new way forward
For decades, non-profit organisations – not only in the US, but all over the world – have been struggling with a central funding problem: while it is relatively viable to raise funds for specific projects and purposes, few foundations or donors are willing to finance the running costs of organisations. There are two main reasons for this: On the one hand, there is the (sometimes unspoken) suspicion that administrative costs are an expression of inefficiency and that free funds are used too arbitrarily by organisations. Secondly, in recent years many foundations and donors have increasingly focused on their own goals and strategies, which they implement within a narrow framework with the help of earmarked funding.
Scott as a pioneer in transparency
With her form of trust-based philanthropy, Scott sends a clear signal: she leaves the decision on the use of funds exclusively to the funded organisations. Her influence ends with the decision on which organisations receive funding in the first place. The organisations are thus enabled to pursue their mission much more effectively by channelling the mega-donations primarily into operational work and ensuring their own financial stability. Moreover, non-profit organisations report that fundraising becomes seamless as soon as Scott favours an NPO. This is an indicator that the selection process is carefully executed and can be trusted.
But this is not the only thing Scott does differently. On her website yieldgiving.com, she not only sets out in detail her motives and perspectives on the world of philanthropy in a series of essays. Furthermore, all 1,604 grants (as of October 2023) are disclosed individually. In addition to the amount of the grant, the list includes information on the recipients, their objectives and the geographical area in which they operate; the list can even be downloaded in full. This kind of transparency is unparalleled in the world of philanthropy.
Opaque selection processes and backroom decisions?
Less easy to understand, however, is the selection process. According to Scott’s website, the research is carried out without the involvement of the respective organisations so as not to burden them with time-consuming application processes. In addition to a small internal team, a large network of external consultants is involved. The selection criteria used to shortlist organisations and decide on funding are not public.
More equal opportunities through tendering
This approach has also attracted critics. If organisations could not apply for funding, they argued, it would be largely left to chance whether organisations worthy of funding would be found and accurately assessed. Subsequently, Scott has reacted to this criticism and published an open call for organisations to apply through their own initiative. Firstly, 1,000 organisations will be nominated, of which, after a peer review process and the decision of a panel appointed by Scott, 250 organisations will each receive a non-earmarked grant of one million dollars.
Donor Advised Funds instead of Foundation for Efficient Processes
In all other respects, however, the funding process developed by Scott remains the same. She justifies it primarily by the low administrative costs – both on her side and on the side of the non-profit organisations. This desire for efficiency informs her entire approach. Unlike many other philanthropists, she has refrained from setting up her own foundation with a large apparatus. She handles her donations through so-called ‘Donor Advised Funds’, a kind of endowment fund administered by banks or foundations. In American law, this is a common and cost-effective way of managing donations.
By foregoing the establishment of a large, complex organisation of her own and distributing almost all funds in a relatively short time, Scott opposes a trend that has significantly shaped global philanthropy in recent years. In sometimes elaborate processes, a growing number of foundations and philanthropists have critically examined their funding activities, formulated their own social visions and ambitions, and developed strategic programmes to implement them. To this end, they work in a consistent manner with selected organisations and monitor progress with the help of agreed interim goals combined with varying reporting system.
In contrast, Scott’s approach seems refreshingly straightforward on the one hand – but is it also strategically sound? Critics argue that Scott loses the opportunity to use her resources to influence and advance a particular agenda. However, this criticism falls short in several regards.
More impact with unrestricted funding
With its special form of unrestricted funding, Scott enables a large number of organisations to invest in their own human resources and strategy development. It can be assumed that in many cases this creates a significant leverage effect – other funders can be targeted or become aware of organisations in the first place through Scott’s grant, which they had not previously been aware of.
Likewise, the selection of organisations is clearly based on strategic considerations: even though the selection criteria for Scott’s donations are not published in detail, the list of grants shows a clear tendency towards organisations that have previously received less of the foundation’s funds. These tend to be organisations run by and for disadvantaged social groups, in neglected regions and under the leadership of non-white people.
In addition, the list “Large donations of 50 million dollars and more” includes an illustrious selection of international organisations. Here, too, the focus is clearly on certain themes and approaches. For example, the community initiative Co-Impact received funding of 50 million dollars – and the Gender Fund initiated by Co-Impact received a further 75 million dollars. Other listed recipients are climate protection and educational organisations, among others.
More freedom and less control
While many foundations and donors expect detailed reporting on the use of the funds they receive, Scott requires no form of monitoring or reporting. She limits herself to having the respective organisations check whether they are recording the impact of their work as part of the selection process. One could criticise the fact that Scott will never be able to capture the entire impact of her funding. On the other hand, Scott’s decision demands respect from the observer: she trusts that the chosen organisations will use the funds sensibly and accepts the risk that this will not be successful in every case.
Conclusion
With her YieldGiving initiative, MacKenzie Scott sets completely new standards for trust-based philanthropy. In the otherwise dependency-driven relationship between organisations and donors, NPOs are given more creative options by being able to decide freely on the use of funds. Although impact measurement is disregarded, effectiveness is nevertheless achieved. Scott shows how it is possible to donate money quickly and efficiently when the focus is on the selection of NPOs rather than on their control and impact measurement. Scott shows that trust-based philanthropy is possible and successful even at a large scale and institutionalised setting.
Scott’s courage to break new ground deserves recognition and a shift in mentality. She proves that there is no need for a traditional foundation with strong administration, control and impact orientation does not have to be established to do good on a large scale. With its donation strategy, it sets a new standard for the quick and unconditional allocation of funds for charitable purposes. In doing so, she fades into the background and instead leaves the stage to the non-profit organisations; a practice that should also find much more space in the funding work of existing foundations. Scott is thus an inspiration to others and a role model for developing philanthropy and making the world a fairer place.
