We have just finished the big charitable contribution season. Donors and foundations have made their annual distributions. Our civic responsibility has been done and the stack of envelopes on our desks has finally diminished. But many of us are left with the big question: Are my gifts making a difference?

What do we mean when we talk about "making a difference?" For me, making a difference is making change. I want to know that something in this world will change because of my money. But how committed are we really to change? In my experience as CEO of a large international foundation and an advisor to individual funders, there is a huge chasm between what we say we want and our willingness to fund it.

There are some understandable reasons for our failure of nerve. Funding change involves risk, and risk entails the possibility of failure. And who takes pride in failure? Imagine that you are the chairperson of a foundation reporting to your board. Would you like to report that a substantial percentage of the grants that you have made have been unsuccessful? Would you be willing to recommend that your foundation emphasize funding high risk ventures at the expense of investing in likely successes?

There is, of course, nothing wrong with funding "safe" causes. There are many serious problems that can best be addressed with conventional methods. Large and well established institutions may be in the best position to implement tried and true solutions. Donors to such institutions can be confident that their dollars will be spent responsibly. They can take pride in their gifts and garner the prestige that comes with them. The not-for-profit world relies on this kind of giving.

But this kind of giving does not "make a difference." Making change requires a different kind of donor. The donor that is willing to think out of the box, to fund start-ups with new and untested ideas, to challenge the common wisdom. A donor, in other words, with risk tolerance.

Very few donors have a high degree of risk tolerance. Sometimes donors can be enticed to join a partnership and collaboration. They will fund an experiment if they can share the risk. But even when they do, they often do not have the patience to see a risky start-up venture through its early, shaky years to see the outcome.

What I have described here is the well-known, essentially conservative nature of grantmaking. It is not surprising, but for many years I nonetheless found it puzzling. After all, many donors have acquired their wealth precisely by taking risks in business. Why suddenly, when they become philanthropists, do they play it safe?

I found an answer in the classroom. In my courses at NYU on the subject of philanthropy, I ask my students - all donors and grantmakers themselves - to simulate an allocation process. I present them with a docket of potential grantees - including both "safe" and "risky" alternatives.

First, each student decides on their own allocation of the funds they have been allotted. At this stage there is always a great deal of variation among the students' selections. Many do select the "risky" grantees.

Yet in the second stage, when the students must come to a group decision about the allocation of funds among the potential grantees, the result is totally different. Invariably, the group will allocate funds only to the safest of grantees. The student, who began the process excited by innovative ideas, defers to another who shudders at the chance for failure. And as each student argues for a different grantee, the group as a whole becomes persuaded that the only responsible way to express their stewardship is to select the least controversial, and the least risky proposals. The group process leads inexorably to risk aversion.

Watching how my students make decisions in the classroom has taught me a valuable lesson. No, not that boards and allocations processes are inherently unwieldy and subject to all too predictable conservativism as true as this lesson is. Rather, a funder or funding organization which a commitment to change must confront its own bottom line - if the stated mission, to be a change agent, to make a difference, to impact a field of service, then that organization would do well to put the issue of risk and risk aversion on the table prior to the allocation process. It is more likely to understand its own predilection or organizational culture, and much more likely to make some room for those innovative and cutting edge experiments which may make all the difference.

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