Simon Prize for Philanthropic Leadership awarded to Frank Hanna

 The Call of the Philanthropist

Meet Frank Hanna, Winner of the 2007 William E. Simon Prize for Philanthropic Leadership
 

On any given day, Frank Hanna will take a lot of phone calls. Most of the calls pertain to business; some, of course, are personal. And then, occasionally, there are times when the phone rings with a solicitation for charity. Oftentimes it would be a friend, calling to ask for a donation to a favorite cause. For years, Hanna would listen patiently, agree that the charity indeed sounded worthy, and offer a contribution. He tried to keep the transaction time to a minimum.

But these calls began to bother Hanna. It wasn't the money. Frank Hanna is a highly successful merchant banker in Atlanta. He could easily afford the donations. And it wasn't the time. He was good about keeping the calls short.

No, what bothered him was the haphazardness of it all. It seemed so scattershot, so directionless, that it was almost irresponsible. This, he realized, is not how I conduct my business affairs. Why should philanthropy be any different? He would often have occasion to recall F. A. Harper's

remark: "Giving in many instances is really little more than the cost of peacefully evicting a well-intentioned trespasser." In any event, this wasn't at all what philanthropy was supposed to be.

Philanthropy should be approached with the same diligence as business: with an engaged and critical mind. It shouldn't rely merely on cold calls. It should be undertaken with focus, discipline, and intelligence. At its best, philanthropy could even be a vocation, a Calling.

Just taking calls, Hanna realized, was keeping him from answering the Calling.

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Since that realization some 20 years ago, Frank Hanna has purposefully pursued the vocation of the philanthropist. Towards that end, he has developed a set of principles for thinking through the theory and practice of effective philanthropic giving. Those carefully wrought principles guide

his support for the promotion of cultural renewal, educational opportunity, and his own Catholic faith. Indeed, Frank Hanna is widely regarded as a precise strategic philanthropist, a donor who judiciously directs his funds to the point of maximal impact. In recognition of his long, quiet labors, The Philanthropy Roundtable has selected him as the winner of the 2007 William E. Simon Prize for Philanthropic Leadership.

The William E. Simon Prize for Philanthropic Leadership honors living philanthropists whose charitable giving has shown exemplary effectiveness. The Prize celebrates the principles which guided Mr. Simon's many charitable initiatives, including personal responsibility, resourcefulness, volunteerism, scholarship, individual freedom, faith in God, and helping people to help themselves. The winner of the Prize receives a $250,000 award, payable to the charity of his or her choice. Previous recipients include Richard and Helen DeVos, Dr. Ben Carson, David Robinson, Sir John M. Templeton, Raymond G. Chambers, and the late John T. Walton. Frank Hanna will receive the Prize at the Annual Meeting of The Philanthropy Roundtable, on Friday, November 9th, in Dana Point, California.

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Frank Hanna is a deeply thoughtful man. He listens to questions attentively, and will often pause and think before replying. When he answers, Hanna speaks in measured and considered sentences, with the honeysuckle drawl of his native Georgia. In conversation, he is equally comfortable discussing finance, philanthropy, philosophy--and baseball.

For Hanna, the idea of philanthropy as a Calling has powerful religious resonance. He and his family are devout Roman Catholics, whose support for the church extends from their local parish to the Vatican. He is a Knight of the Grand Cross of the Order of St. Gregory, and his work within the church includes his efforts as a Knight of the Order of the Holy Sepulcher, a Knight of the Order of Malta, a board member of the Papal Foundation, and a member of Regnum Christi. Through it all, Frank Hanna has also coached little league soccer and basketball, and taught Sunday School.

That same dedication characterizes Hanna's career. His achievements are extraordinary. He was named a National Merit Scholar and a Truman Scholar before graduating, with First Honors, from the business college of the University of Georgia. He went on to study law at the University of Georgia, where he took his degree, cum laude, in 1986. After a stint as a corporate attorney for Troutman Sanders, LLP, Hanna accepted a position as Group Vice President, Finance and Administration, for Nationwide Credit. In 1989, he co-founded Account Portfolios Management, Inc. In his role as chief executive officer, he oversaw the purchase and management of portfolios of non-performing loans and accounts receivable. Three years later, Frank Hanna founded HBR Capital, Ltd., which he has headed ever since, guiding the firm as it invests in financial services and information-processing enterprises.

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If you ask Frank Hanna about philanthropy, be prepared for a nuanced disquisition on the nature of property, the legitimate purposes of wealth, and the moral imperatives of the virtuous life. His conclusion, however, is relatively simple. In essence, Hanna believes that people should give away all non-essential wealth within their lifetime.

But what, exactly, constitutes non-essential wealth? The term seems to suggest that some wealth may, in fact, be essential. According to Hanna, essential wealth provides for the fundamentals of life. It includes provision for the bare necessities of life--food, water, shelter--both for ourselves and for those who depend on us. It likewise extends to our genuine needs, things that, though not strictly necessary for survival, nevertheless make life minimally comfortable--eyeglasses, for instance, or dental care. Genuine professional needs count as essential. Even beneficial goods--like traveling abroad or attending the symphony--can qualify as essential, since they genuinely improve us, even if we would still be able to flourish without them, if to a slightly lesser degree. Only once it exists beyond provision for these fundamental needs does wealth become non-essential.

Yet even non-essential wealth has the potential to serve highly productive ends. When actively and intelligently invested, it can lead to the creation of still more wealth--which in turn means more prosperity for more people. When non-essential wealth sits idly, however, earning mere market returns, it can become dangerous. Hanna is willing to explain at length and in detail how such idle, non-essential wealth threatens those who have it, and those whom they love. It can corrupt the soul, breeding arrogance and laziness; it can threaten identities and lead to irrational guilt. It can become a distraction and a frustration; it can destroy a healthy sense of limitation, and delay the resolution of real problems.

For that reason, Frank Hanna recommends as a safeguard against such dangers, donating a regular percentage of one's wealth to philanthropy. His baseline suggestion is for whichever of these is greatest: either 10 percent of one's annual increase in net worth, or 10 percent of one's annual living expenses, or an amount equal to one's net worth, divided by the number of years that one can reasonably be expected to live.  The proposal tries to approximate the venerable tradition of tithing, which makes relatively modest demands with absolutely regular consistency.

Crucially, Hanna stresses the importance of starting to give immediately. To delay the start of a philanthropic regimen is to beset oneself with problems. For one thing, there is always a reason to hold off for a little while longer. For another, delay denies help to those who need immediate assistance. For still another, delay forecloses the opportunity to teach philanthropy within the family. Starting a philanthropic regimen is like opening a school of virtue, where future heirs may begin to learn the art of giving--while being gently reminded that they have no absolute claim to non-essential wealth.

Resolving to give away non-essential wealth is the first step. Next comes determining how best to do so. It's a question that has long occupied Hanna's mind.

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To Frank Hanna, philanthropy is an undertaking that must be conducted according to the "obligation of prudence." Prudence is a term widely misunderstood today, but the concept enjoys a long and distinguished philosophical pedigree. Aristotle considered prudence the queen of the moral virtues; it alone involved both mind and will. Prudence, Aristotle argued, has a twofold intellectual component. It first determines the moral ends to be attained; then it designs the means best suited to their attainment. Once its intellectual work is accomplished, prudence must govern the appetites in order to attain the goal identified with the means designed.

Among businessmen, the obligation of prudence is intuitively understood and rigorously applied. But philanthropists--even the successful entrepreneurs among them--often seem to lose sight of it. For one thing, they are sometimes so impressed by manifest good intentions that they overlook the prudential imperative. The heart, alas, can overpower the head. Further complicating matters is the perennial problem of comparing moral goods. Who's to say that it's better to fund a soup kitchen than to build a healthcare clinic? Can we know for certain that it's better to establish a primary school than to rehabilitate prisoners? The head, unfortunately, can be overwhelmed.

But the real obstacle for the prudent philanthropist is the absence of a common basis for measuring effectiveness. "How do I measure success?" asks Hanna. "How do I measure failure? These questions are the bane of philanthropy." In business, money provides a common unit of measurement for comparing investments. Every businessman understands the concept of return on investment; profit margins are profit margins across all market sectors.

Philanthropy, however, lacks a definitive way to establish success. "You have to move from an absolute measurement to a more relative or comparative measurement," Hanna observes. "It's an inexact science. But there's no point in getting too frustrated with the inexactitude. After all, raising children is an inexact science--but that doesn't mean we shouldn't do it." Inexactitude simply requires additional care, a fact as true of philanthropy as parenting.

For that reason, Hanna has developed a set of prudential principles to guide his charitable giving. He begins with the first question of prudence: What are the moral goods to be pursued? The answer, he has discovered, subscribes to what he calls the Principle of Indispensability: "Support indispensable causes to which your support is indispensable."

According to Hanna, donors should direct their funds only to causes they deem truly essential. "I believe," he writes, "that the charities to which we give significant help should themselves be indispensable. In other words, their success should bring to mankind physical, intellectual, moral, or spiritual benefits of the most important kind, benefits without which mankind (or particular individuals) would be fundamentally diminished."

Once philanthropists have identified the indispensable causes, they should restrict their donations to charities for which their support is truly indispensable. A small contribution to a massive organization will have marginal influence, at best. A series of marginal contributions is hardly better. Funds are always best spent where they will be put to the most effective use. If the organization can succeed without this donation, the money would be better spent on an organization that absolutely needs the funds to attain its objectives.

The Principle of Indispensability is designed to help maximize the leverage of charitable contributions. "Archimedes is credited with discovering how to use a lever to get seemingly disproportionate results," says Hanna. "But Archimedes didn't just stick his lever anywhere. He had to find the point of maximal leverage." So too with philanthropy: Charitable donations achieve seemingly disproportionate results when they are directed to the point of maximal leverage.

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The Principle of Indispensability meets the first criterion of prudence; it identifies the moral goods to be attained. The second criterion of prudence, meanwhile, demands that adequate means be devised to achieve these moral ends. Hanna has devoted considerable thought to this second element of prudential philanthropy, and has devised a set of guidelines to help him maximize his charitable investments.

The philanthropist, no less than the businessman, should search for synergies. Donors should seek initiatives that will benefit from the specific combination of their knowledge, interests, wealth, and expertise. "In practical terms," Hanna explains, this means we "should contribute money to philanthropic activities in fields in which we're already actively and even eagerly involved. It's in such endeavors that our judgments of the charities are likely to be keener, and our own contributions--financial and otherwise--are likely to prove indispensable."

Donors should also take special care to observe the leaders of the organizations they support. "You get extraordinary results from great leadership," says Hanna. "They're like good managers in business. In business, you're always on the lookout for good managers." Good leaders exhibit a number of qualities--honesty, creativity, humility--but Hanna is especially interested in leaders who expect accountability. To the extent that they can, good leaders will offer independently verifiable evidence of their efficiency and effectiveness. They welcome evaluation, seeing it as an opportunity for improvement. "Those are the All-Stars. Those are the Cy Young pitchers."

For similar reasons, Hanna advises investment in initiatives rather than institutions. He allows that "institutions are relevant," but immediately warns that "it's hazardous to put your faith in institutions." A well-established institution, redolent of tradition, may seem like a suitable venue for a prudent endowment. But while institutions can change, endowments are forever. Funding temporary initiatives is one way to ensure that money is used in ways consistent with the donor's intentions.

To illustrate the point, Frank Hanna recalls the tale of an elderly gentleman, who at great expense funded a chair in Catholic Studies at a prestigious university some 50 years ago. The benefactor devoutly wished to see his endowment promote a better understanding of the faith he loved so dearly. Instead, he witnessed professor after professor use the position to launch vicious attacks upon the church. The thought of it was enough to bring the old man nearly to tears.  

When supporting initiatives, however, donors must also take care not to foster dependency. Charities strive to instill independence in individuals, and philanthropists should replicate the effort with respect to organizations. Once the entrepreneurial stage of a charity has been financed, if the endeavor is meeting its objectives, it should be spurring the donations of others.  "A philanthropist has a moral obligation to spend wisely, and to encourage this type of strategic planning," says Hanna. Good intentions are certainly laudable, but they are in themselves insufficient. Effort is not the same as effect.

Philanthropists should never hesitate to draw upon their private sector expertise. In Hanna's case, that means finance. His work requires him to persuade other people to let him use their money, in order to generate greater returns for all parties involved. An analogous strategy can be applied to philanthropy through the creation of matching grants. Matching grants allow an organization to use other people's money to incentivize further fundraising, without diminishing the enthusiasm of other donors.

Nevertheless, Frank Hanna recommends against philanthropists becoming too directly involved in fundraising. For a charity, it may seem to make good sense to ask donors to help work the phones--the multiplier effect of additional donor-raised contributions can potentially be quite substantial. For individual donors, however, it is not at all clear that the arrangement is beneficial. Those with a genuine talent for business may actually serve their causes better by restricting themselves to making money and donating the extra funds. Investing time and energy into fundraising may actually diminish total returns; for many entrepreneurs, the comparative advantage lies in generating wealth. Donors, he concludes, should generally resist the fundraising temptation.

Finally, Hanna believes that philanthropists should limit their attention to a few, select initiatives. "With so many needy and worthy organizations and persons vying for attention, it's hard to stay focused. Before long, you can find yourself involved in so many projects that you're not really serving any of them well, and even your financial contributions are not being used effectively." For Frank Hanna, it all comes back to prudence. Properly practiced, philanthropy is prudential. Prudence, by its nature, involves an honest assessment of limitations, and limitations sometimes require one to say, "No."

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Hanna focuses his own philanthropy on efforts to renew the culture. The longstanding debate over how best to do so--whether to engage in politics or in culture--is not satisfactorily resolved with an either/or answer; politics and culture inevitably influence and reflect each another. He is fond of quoting the late Sen. Daniel Patrick Moynihan: "The central conservative truth is that it is culture, not politics, that determines the success of a society. The central liberal truth is that politics can change a culture and save it from itself."  

Still, Frank Hanna has a clear idea of where to begin: "By and large, the most leveraged point for renewing the culture is in education." He has been thinking about educational reform for a long time. He was an undergraduate when the National Commission on Excellence in Education released its bombshell report, Nation at Risk. Like many others, Hanna was appalled at the report's findings. Unlike many others, he committed himself to creating sufficient capital to make significant investments in education reform.

Those investments have taken multiple forms. For a while, Hanna produced and hosted a weekly television program in Washington, D.C., called One Room Schoolhouse, which sought to teach parents how to become more actively involved in the education of their children. He later helped secure the passage of Georgia's first charter school bill, and has since lent his support to school choice initiatives.

But Frank Hanna's real passion is for Catholic education. Catholic schools, he explains, are particularly well suited to the task of educating the whole person. Their pedagogy is rooted in the affirmation of human dignity and of humanity's transcendent vocation. Hanna believes that, unlike the public schools, religious schools have the ability to teach that truth exists, that the human mind can learn truth, and that knowledge of truth contributes to the life of virtue.

Unfortunately, many Catholic schools face serious financial difficulties. For a variety of reasons, Hanna says, "the average Catholic school today does not have a viable business model." And the problem is most acute for middle-class families. The wealthiest tenth can afford the tuition at elite Catholic academies, while the poorest tenth can avail themselves of externally subsidized inner-city Catholic schools. But for the eight-tenths in the middle, Catholic education is becoming ever more unaffordable.

To that end, Hanna has helped found several new schools to serve Atlanta's Catholic population. In 1993, he joined a group of businessmen, educators, and lay leaders who, under the spiritual direction of the Legionaries of Christ, established the Pinecrest Academy in Cumming, Georgia. The school set down its roots in a rented building with a single class of 29 students. Today, it flourishes, offering pre-kindergarten through high school, and is spread across a handsome 68-acre campus.

 Pinecrest's success convinced Hanna to repeat the effort. In 1996, he helped found the Holy Spirit Preparatory School in northern Atlanta. Like Pinecrest, Holy Spirit provides classes from preschool through high school. It too is prospering, and has likewise proven a blessing for middle-class Catholic families.

Most recently, Frank Hanna led the effort to found Solidarity School in Atlanta. Unlike Pinecrest and Holy Spirit, Solidarity was not built with middle-class families in mind. The school is located in a predominantly Hispanic neighborhood, in what had been a crime-infested shopping center. Hanna bought out the complex, renovated the facilities, and opened the doors to the first class of 12 children in the Fall of 2000. Today the school serves over 90 students, and forms an integral part of a planned urban village, with a mission church, community services, and locally owned small businesses. Parents of the students mostly work in construction or fast food, as maids or day laborers, but all are expected to buy into the project, either with tuition (set at $5 per week) or volunteer labor.

Students at Solidarity receive a phonics-based, English-immersion education. They wear uniforms, stay in school until 4:00 p.m., and take only four weeks off for summer. Expectations are high. The school hopes that, upon graduation, its students as a group will test at least one grade level above students in the public school system. And parents are plainly delighted. "We heard in Mexico that public schools in America don't give a lot of attention to Hispanic children," one parent told the Atlanta Journal-Constitution. "I feel very satisfied with this school. It's a little like family here."

Hanna is quick to point out that the school has lent validation to an argument often advanced by proponents of school choice. Solidarity has actually served to improve the local public school. As parents in the public school system became aware of Solidarity's success, they began to push for reforms. Competition increased quality across the board. A note of satisfaction creeps into Hanna's voice: "Our dollar a day program really shook up the community."

Is Solidarity's success replicable? "Maybe," says Hanna, "but it's too early to tell if the model can be franchised." But the school was never intended just to be an educational experiment. "It was and is, first and foremost, a corporal work of mercy."

It is a corporal work of mercy that has attracted some notice. Hanna's work with Solidarity School contributed to his appointment as co-chair of the Presidential Advisory Commission on Educational Excellence for Hispanic Americans, where he oversaw the production and delivery of the commission's report, From Risk to Opportunity.

From reading Nation at Risk to writing From Risk to Opportunity, there has been a long arc to Hanna's work in educational reform. It has been the work of a lifetime--long, patient, and characteristically prudent.

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If educational reform represents an effort to renew the culture from the bottom-up, then public policy advocacy is a way to change the culture from the top-down. Because the task of cultural renewal cannot ignore politics, Hanna has strategically donated to groups that he believes are making real progress in preserving and extending the American experiment in ordered liberty.

In doing so, Frank Hanna rigorously applies his Principle of Indispensability, avoiding organizations where his contribution would be non-essential, and focusing instead on a few, medium-sized, high-impact public advocacy groups. He reserves his support for those groups that know how to really leverage their resources. "Einstein is supposed to have said that the Eighth Wonder of the World is compound interest," says Hanna. "A similar compounding effect--where gains build on gains--can come from dedicated organizations."

Frank Hanna believes that one such dedicated organization is the Acton Institute. Acton is a research and education think tank that describes its mission as the promotion of "a free, virtuous, and humane society" which "recognizes the benefits of a limited government, but also the beneficent consequences of a free market." Hanna discovered Acton through a column in Forbes. The essay was written by the Institute's president, Fr. Robert A. Sirico. Hanna was impressed. "This guy's good," he thought. (The esteem is clearly mutual; Sirico says of Hanna that he "inspires me with his friendship, loyalty, honesty, and faith.") The more Hanna studied the Institute, the more impressed he became. "Acton is the nation's foremost advocate for a free market circumscribed by the Judeo-Christian ethic. They're the best I've found. Best in class." In addition to financial support, Hanna has offered his time and talent, serving on Acton's Board of Directors as vice chairman.

Hanna has likewise been impressed by the work of the Federalist Society. Founded in 1982, the Society is composed of center-right legal professionals who take as their foundational principles the ideas that the purpose of the Constitution is the preservation of freedom, that to achieve this end the Constitution requires a strict separation of powers, and that the judiciary best serves the cause of freedom when it restricts itself to its limited constitutional responsibility. Under its auspices, a network of law students, professors, and practicing attorneys gather to discuss and debate these principles in light of current developments within the law. "They are stalwart defenders of the rule of law," says Hanna, "who benefit from brilliant leadership that understands how to bring people into contact with ideas."

Frank Hanna is also willing to find and fund individuals who are making genuine contributions towards the protection of American civil society. "Look at Maggie Gallagher," says Hanna, referring to the president of the Institute for Marriage and Public Policy. "[She] is a top-notch scholar, working on demonstrating the importance of marriage as a social institution." He points to Robert P. George of Princeton University, who is not only "one of the world's leading authorities on natural law," but is moreover "doing really amazing work in bioethics." Rick Santorum has long been "one of the most consistent and effective voices for the family. He'll continue to do that, because he's fearless." Hanna supports each of these individuals, because he believes their work is indispensable to the task of cultural renewal, and because he believes his support is indispensable to their efforts.

In all of this, Hanna has dutifully followed his own guidelines for how to make the indispensable philanthropic investment.

Take leadership, for instance. Hanna frequently underscores the importance of good leaders: "people who work in a superlative manner, who lead with wisdom and humility, they're the ones who get disproportionate results." Others have noticed and responded. Sirico recalls that "Frank and I got to know each other over a period of time, during which I realized he was taking my measure. Once he was convinced of the soundness of our approach--and, I suspect, of my personal integrity--Frank was ready to move forward."

Leonard Leo, the executive vice president of the Federalist Society, noticed much the same thing. "Frank understands that lasting success requires more than just good ideas and a marketing plan. You need talented people to direct and manage an effort each and every day. When you make investments in good people, they in turn make investments in causes that have high returns in terms of transforming our culture." Leo pauses for a moment, then continues. "It's like the parable of the master who gave each of his slaves 50 talents--I doubt Frank would have much patience either for the one who buried the money, without making any effort to direct his talents to multiplying value."

Among the organizations he supports, Frank Hanna has made it his constant practice to search for opportunities to leverage the group's influence. "Frank is one of those Board members who continually asks hard questions of us," Sirico explains. "He looks beyond the enthusiasm for a project and wants to know hard facts about how influential an idea or program will be--not how many books we will publish, but how many people will read the information. He wants bang for the buck, and is highly strategic in his thinking."

Leo says much the same. "I think that Frank saw in the Federalist Society an opportunity to create significant value dollar-for-dollar, because we are in the business of creating an infrastructure of talented leaders whose reach could extend to addressing many, many different problems with our legal culture. The versatility and broad reach of this infrastructure lays a foundation for ranging, long-term impact, well beyond a small set of particularized successes."

But most of all, Frank Hanna is known for taking an active, personal role in the causes he supports. "Frank is not so much a philanthropist as he is an investor," says Kevin Hasson, of the Becket Fund for Religious Liberty, another group Hanna supports. "He not only invests money in you, but he's committed to improving what you do so that both you and he are more successful. Frank always asks questions that no one else has thought of. He forces us to improve in ways that we didn't realize we needed." Leo again wholeheartedly concurs: "Frank is the kind of philanthropist who provides more than funding. He is a role model, showing how a proper application of faith to all aspects of your life can lead to a better appreciation of your vocation, and, in turn, the achievement of greater good for your fellow man."

 Sirico agrees. With a grin tugging at the corners of his mouth, he attests, "if Frank gets involved, he jumps in at the deep end."

 

Christopher Levenick is editor-in-chief of Philanthropy magazine. This article is from the October 1, 2007 issue.