The Planned Giving Value Chain
Planned Giving Today


Manufacturers started it, and the technologists refined it and applied it to the economics of information. I'm talking about the concept of the Value Chain. As established by Michael Porter of the Harvard Business School, the Value Chain was originally defined as how a business receives raw materials as input, adds value to the raw materials through various processes in the middle of the chain and sells finished products to consumers.

Think of something simple, like coffee, that finds its way as raw beans from the field, through brokers who add value by finding buyers, past warehouses that add value by preventing spoilage, into processing plants that add flavorings and packaging, and on to wholesalers who also add value by lowering distribution costs, and finally to the grocery store, which adds value through the presentation of the product on the shelf. Throughout the chain, value is added.

Other definitions stretch us beyond a single company to a string of companies working together to satisfy market demand – and deliver value. For instance, another definition looks to "multiple enterprises within a shared market," cooperatively planning, implementing and managing the flow of goods, services and information from point of origin to point of consumption. In this model, each separate enterprise represents a link in the chain.

What does the Planned Giving Value Chain look like? And what does it mean to us?

Visualize the spectrum or horizontal chain this way: At the beginning, way off to the left, is the accumulation of wealth. On the other end, after all the value is added, is a social outcome: more people reading, a cleaner environment, whatever the desired charitable result of the donor's gift.

Beginning with the accumulation of wealth, the links of that chain include donative intent; advisor guidance (that would be us); the planned gift closure; and the fruition of the gift, all events that must transpire so the gift can be fully enjoyed by the charity, including the termination of a CRT, for example. And finally, near the end of our chain, is the use of the gift by the charity, and then of course, the desired social outcome.

In the Middle

We, as gift planners, are in the middle. That's right. We're a middleman, adding value to the chain for the ultimate satisfaction of the donor and society.

I'm suggesting that we – as individual professionals, and collectively as a gift-planning profession – take the horizontal, donor-centered, collaborative view. When we view our roles through this prism, we get a very clear view of the single largest threat we face – disruption. Disintermediation. The annihilation of a middleman.

Just as an example, what if Congress flat-out repealed Code Section 664? That would put us in a state of disruption. And what about the growing power of donors who have access to advice from many quarters? The fact that such flow of information may be less functional (meaning not as experienced or specialized) might not trouble many donors as we believe it should. For donors there are an upside and a downside to the empowerment that has come about over the last number of years with the free flow of more information and choices.

Empowerment links, enlightens and exhilarates. But it also isolates, confuses and bewilders. The planned giving profession has a valuable role in helping donors manage this double edge of empowerment, allowing the donor to dedicate his or her time to the accumulation of wealth and personal and family endeavors.

On an even more personal level, consider the disruptions that could affect your shop or weaken the chain in its entirety.

So what do we do? Clayton Christiansen of the Harvard Business School argues that the business processes most vulnerable to disruption are those with a very high level of functionality or specialization. They are overtaken by lesser offerings valued by customers for their speed and flexibility.

Delivering Value

We must find new ways to deliver value – value as the donor defines it, not as we perhaps once defined it in terms of high levels of specialized expertise.

For many of us, high functionality – expertise – is our lifeblood. But we must take collective responsibility for conveying or communicating the value of that expertise to the donor.

Consider the outright gift in the context of a value chain. With an outright gift as compared to a planned gift, advisor guidance is likely to be a smaller piece of the chain, and the gift would come to fruition immediately, meaning that in most instances, there is no waiting period between the gift being made and the use of the gift by charity. So the value chain is shorter to get to the ultimate social outcome.

Clearly, and in this context, there is a case to be made that the outright gift appears to have a higher value to the donor than a planned gift. But we know that there is more to that perception of value. We know that problem solving for the donor by using planned giving vehicles may help the donor with business succession or portfolio diversification issues, just to name a few, and a sophisticated gift plan may include an outright gift.

We also know that once the donor commits to a planned gift, other planned gifts, such as a bequest, may work out for that donor at another time. Once the planned gift is in place, we have an opportunity to continue to help the donor and maybe discuss the gift of their income interest in a CRT, for example.

Yet the very best way for donors to see more value in planned gifts is for all of us – especially charities – to see more planned gifts come to fruition sooner. Remember, in some respects, we're still pioneers. For instance, we haven't even gotten into the first generation of a significant number of new planned gifts coming to fruition, and charities are not yet fully reaping the benefits of our more recent collective efforts.

Billions of dollars are pent-up in CRTs for the ultimate benefit of charity. Once that first cycle hits, a consistent flow of planned gift fruition will result, and our added value will be much more tangible.

So the key is value. And donors' definition of value keeps changing, with new laws, new competitors, new levels of donor knowledge. Our protection lies in our ability to collectively increase our value and clearly express that value to the donor. And sometimes we have to move within the value chain to overcome a disruption.

The 211 Line

Look at the reality now confronting umbrella groups such as United Way. Sure, they add value lots of value but today's consumer is making them prove it. And interestingly, the United Way is starting a "211" line, like "911" for police or "411" for information. The "211" line is essentially a social services hotline.

At least from where I sit, and in the context of the value chain, it appears that the United Way is trying to increase its value at a different place along the chain, moving upstream to fill a new need, simply by taking advantage of what they already know and do. Rather than be disrupted – and stand their ground as a clearinghouse for gifts – they're moving to fill a new link in the chain.

Over the past 15 years, many organizations have been strengthening their individual links in the chain. By our collective, but often-independent, efforts, we have exponentially increased the value of the overall Planned Giving Value Chain. As middlemen, we have been doing our job.

But we have to keep at it if we are to protect against disruption. And collaboration is essential. Yes, we are collaborating in planned giving. Charities are establishing planned giving advisory committees and are producing sample documents with legal guidance. Joint ventures are sprouting up between charities and for-profit organizations. The key is value, or perceived value, to the end user. Collaboration in this model is not a courtesy, but a requirement for maximum efficiency and sustained growth. When collaboration shrinks the distance and cost between the accumulation of wealth and the realization of social good, the value to the donor goes up.

I know that as an attorney I can't do the investment analysis in a planned gift and can't best express the passion and needs of a particular charity. We have recognized that all aspects of our industry – planned giving officer, investment and financial professional, trust officer, attorney, CPA, and so on – add value to our individual link in the chain.

Working Together

We have no choice but to learn more about our counterpart professions. After all, we're working together now! That combined knowledge beyond a narrow specialty is what it will take to actually quarterback a sophisticated gift transaction. Quarterback – not dictate. Lead – not control.

Trust is an essential element of donor value. If trust cannot be established and maintained among the enterprises in the chain, some of those enterprises become vulnerable, donor satisfaction suffers and the social outcome is adversely affected.

Collaboration opens another door, a portal to the unprecedented opportunity to participate in sophisticated gift plans that one would not otherwise have gotten a chance to play a role in or influence.

If you have a strong chain of advisors, you will be comfortable addressing any donor with a gift plan including unique or sophisticated assets. It is the only way to take your planned giving program (whether for-profit or nonprofit) to the next level. We add maximum value as middlemen when we, as a gift-planning profession, collectively problem solve for donors in order to formulate and fulfill their personal, financial, estate, tax and philanthropic goals.

Jonathan Ackerman, 2002 President of NCPG (now known as Partnership for Philanthropic Planning), represents donors and tax-exempt organizations on a national basis. His advice is often sought by charities in their creation and operation, especially with respect to contributions and other funding opportunities, as well as by families (and their advisors) who desire to integrate philanthropy into their estate plans.

Editor's Note: The above article has been adapted by the author from his presidential address at NCPG's 2002 National Conference.