By Charles Bronfman and Jeffrey Solomon

SAY YOU’RE SIXTY-SEVEN, AND YOU’VE SPENT your career turning your father’s hardware store into a successful chain of stores throughout the Midwest. Your children have no interest in taking over the business, so you decide to cash out. When the $50 million arrives by wire into your account, you are floating. Then it hits: What to do with so much money? You have vague thoughts of travel and a fondness for musical theater, but few interests beyond that. Your life has been your work. You’re a widower, and you want to set some of the money aside for your children and to be comfortable yourself. But that still leaves well over $30 million. You’re seized by the idea that you should be good to the society that has been so good to you. A major gift to your alma mater, perhaps, or possibly endowing a struggling theater in town? But, you wonder, aren’t there more important causes?

But what?

Or maybe you’re forty-three, with a fistful of stock options in a company that was nothing more than a bunch of interesting algorithms when you first signed on. The options have skyrocketed in value nearly a thousand-fold, making your net worth jump from about $17,000, or whatever your car and clothes were worth at the age of twenty-four when you joined the company, to somewhere north of $10 million today. You’re unmarried, with just a cat for regular company—and you aren’t the type to give everything to her. You have your own financial security to consider. But that still leaves at least $5 million ‘‘extra,’’ as you think of it. And with everything that is going on in the world, you feel a little weird about having so much money just sitting in your investment account. You’ve contributed to political campaigns, donated a few thousand dollars to breast cancer research and other causes, but now you’re thinking that maybe you should do more to make a positive difference in the world.

But what?

Or let’s say you’re twenty-five. You’ve been at your first job for a few years now and recently got a raise with your first promotion. You rent, have a roommate, and tend to be economical. So even after your student loans and car payments, you have a bit left over. You see what is going on in the world, and you’d like to do something to help. Your company will match your donations dollar for dollar. But there are so many choices! You’re besieged by requests from friends to sponsor them on charitable walks, runs, rides, events. You don’t have that much money, but you would like to do something smart and useful with it.

But what?

Can you just sprinkle your money over a few congenial nonprofits with nice brochures and celebrity endorsements, and then watch these institutions crank out good works? Perhaps. But for all of its many assets, the nonprofit sector, like all others, is pockmarked with tragically underperforming elements. Just as there are killer stocks and there are duds, the investor in nonprofits faces a welter of good, not-so-good, and third-rate organizations clamoring for his money.

We think of philanthropy in investment terms—investments for a better world. Although, as we will point out, the challenge in nonprofits is often choosing between good and good, there are enough underperforming ones that donors should be wary. Too many nonprofits lack clear purpose, effective leadership, and competent management, and their highest priority appears to be preserving their own existence. We assail these underperformers because such entities turn the spiritual act of giving into a frustrating game.

It is important to remember that a nonprofit is a business, and it should be run as one, with no less an emphasis on efficiency, transparency, and accountability than you would find in its for-profit counterparts—indeed, more so. Although we celebrate the differences between mission-oriented nonprofits and profit-oriented businesses, we acknowledge the gap in measurements, benchmarks, and markets.

Nevertheless, the principles and experience of transparent competition can serve societal needs beyond the simple marketplace. There is a plethora of nonprofits in the United States, over 1.7 million in all, and they are often staffed by untrained volunteers who can be difficult to manage without financial inducements. The talent pool for paid management staff is shallow. Who do you know who made it his life’s ambition to run a nonprofit? Compared to for-profit equivalents, the salaries are paltry, the status not much better, and precious few university programs offer these professionals any serious instruction.

Now into this jumble comes you, the neophyte donor, eager to make a difference with your money. Most likely, you have no direct experience with nonprofits beyond having been a consumer of some nonprofit service in a hospital or school, or done some volunteer work, or perhaps served on a board. And yet you expect to engage in serious philanthropy before the week is out.

You have every right to insist on best practices in any organization you are going to favor with a donation, but you also need to focus on yourself. This may seem antithetical in an area of life that seems to rely on the most abject sort of selflessness: giving your hard-earned money to benefit people you don’t know. But every transaction is an exchange; nothing is ever one way. When you give, you get, and we believe you need to focus on what it is that you are getting for what you give. We argue that what you get in philanthropy is nourishment for that portion of the body that is so sacred it cannot be found in any book of anatomy: the soul, where all that is best in us resides. It is simultaneously the innermost self and the one so external it seems somehow eternal—which makes it the natural connection point for our philanthropy, for we give to improve the world in a lasting way and to leave it with our stamp.

Excerpted with permission of the publisher Jossey-Bass, a Wiley Imprint, from The Art of Giving: Where the Soul Meets the Business Plan.  Copyright (c) 2010 by The Andrea and Charles Bronfman Philanthropies.