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Mandatory Annuity Distributions and Corporate Social Responsibility

October 19th, 2014

Richard Marker

How did that happen? It sort of sneaked up on me but a manager of some of our retirement funds was unequivocal that I am not very far away from having to take distributions from those funds. One may try to deny the inevitability of getting older, but the IRS only looks at your birthdate.

What I learned was that I have done a respectable job of planning and saving for the post-work years – which I hope are still many years away, but I haven’t done such a good job at doing so in the most tax advantaged way. [Before I continue – if you are a financial planner, wealth advisor, or fund raiser, please do not contact me. The point of this post, to be made below, is about something else altogether.] I confess that I hadn’t given much thought to the way in which annuities and other accumulation vehicles are taxed – or why.

Indeed, in looking at the way different vehicles are taxed, it became pretty clear that there is no inherent public policy benefit which accompanies the various instruments yet there are real tax differences. The only logical explanation is that certain approaches are beneficiaries of effective lobbying efforts; they may or may not be in the best interests of either retirees or of the society writ large.

As long time readers of these posts know, I am a believer in taxes. Frankly I think that most of those who can afford to pay taxes pay too little, and are willing to pay more. We should expect more and pay for more from our government. Health, education, retirement, etc. shouldn’t be dependent on the vagaries of one’s employment but rather built into the fabric of a functioning society. These are communal values which should be made manifest by our support for the systems that sustain them, i.e., taxes.

Yet, it is not surprising that faced with the option of additional income into our pocket, it is tempting and probably prudent to make significant changes in our investment allocations. In doing so, I and we would only be following the law, and not doing so would make us seem like saps, squandering what can be rightfully ours. As one who has, in principle, done our own taxes every year, that is no different than what I have done each year – utilizing all legal and available legal deductions and reductions. [I am proud to say that IRS auditors have agreed.]

What upset me, though, in contemplating the choices before us now, is that our current choices would be based exclusively on taxes. That hasn’t been the case in the past. We didn’t buy our co-op primarily because of tax advantages; we don’t make charitable gifts because of tax deductions; we don’t go to doctors because of health care deductions. Those tax implications are benefits of other more primary and essential decisions we have made and are consistent with some clear public policy benefit. But if we change our investment approaches now it wouldn’t be because of any value in our lives other than our tax bill. Something to think about.

Which brings me to what this post is really about: Corporate taxes and corporate social responsibility.

It is no secret that many corporate entities make major strategic decisions based on taxes. One would have to have had one’s head deep in the sand for months to have missed some highly visible and flagrant recent examples. Some companies have “merged” in order to move their corporate headquarters to a more tax friendly country. Some have incorporated in states or cities or countries with more favorable tax rates. Some have negotiated with states or local government for tax relief – only to move elsewhere when those exemptions expired.

If one listens to their arguments, they suggest that US taxes are too high. That would be credible if they actually paid those taxes. But every study of what many corporations actually pay shows that there is very little correlation between what the tax rate is and what is actually paid.

Of course, they argue, they are only following the laws, only taking deductions they are permitted to take. That may be true but it is, at best, disingenuous. After all, these corporations pay very, very, very, big bucks to lobby for favorable tax laws. Is it any surprise that some have a balance sheet showing profits of $billions, sufficient to pay dividends and huge salaries, but, miraculously, they have no taxable income? That doesn’t just happen, and it certainly isn’t good public policy. Why, I wonder, should I, through my taxes, be subsidizing these $multi-billion companies?

Many of these same companies pride themselves on their generosity. They have employee engagement programs, corporate matching of charitable gifts, sponsorships, have a corporate foundation, and many other worthy and well meaning efforts. All of this is called “corporate social responsibility.” These efforts add up to an average of about 1% of their profits.

I have a proposal to corporations. Do you want to be known for your corporate citizenship? Pay your taxes at the same rate as your employees. My guess is that would far exceed the amount now allocated for CSR.

Just imagine how much would be available to solve social problems: SNAP funding and unemployment benefits for the long-time unemployed could be restored. Pell Grants could be readjusted. Social welfare organizations could get paid in a timely manner. Bridges and railroad tracks could be repaired. Who knows what else?

Sure, the voluntary efforts currently known as corporate social responsibility are very welcome. Keep it up. But they pale in comparison to what social good could be accomplished if these same companies paid their fair share – as all of us are expected to do.

No one likes paying taxes, including me. But all of us take advantage of what our taxes provide, including corporations. None of us should be exempt from our communal social responsibilities. None.

I Can’t Get No Satisfaction. Maybe It’s the Implementation.

September 19th, 2014

Richard Marker

You’ve tried and you’ve tried and you’ve tried and you’ve tried but you can’t get no… OK – enough Stones. The dilemma remains, though. The organizational changes so carefully and artfully prescribed in a tome by an outside consultant, or developed after months of meetings by a board/staff leadership task force sit gathering dust on shelves? Or perhaps they are in long ignored PowerPoint files?

How is it that the brilliantly conceived Venn diagram, identifying the ideal sweet spot for your organization or foundation, seems to leave you more in the margins than in the center? How is it that the staff/board/clients/stakeholders don’t get it? Why is it that people mouth the words, but their actions belie them?

Of course, there are many possible explanations [see post of 30 January 2014; consider this an addendum]. The odds are pretty high, though, that the missing ingredient in your strategy plan is “implementation.” What changes will make it work, make it stick, make it believable, make it convincing?

About a quarter of a century ago, I was approached to join one of the major consulting firms. We came close, but our discussions fell apart on the issue of implementation. My position, having been honed by having experience as both a strategy consultant and an organizational executive, was that there is nothing magical about a strategy plan – even the most insightful and brilliant one is meaningless if no one uses it. Their response- “We do strategy; it is up to the client to figure out how to implement it.” [I have no idea if that firm would say the same thing today; I can only report that over the years we have had numerous clients who have complained about the dusty unused reports from some of those same well-known firms.]

Why are strategy plans so hard to implement? Here are a few suggestions that might help get to that “satisfaction”.

1. Short-term wins.

Sometimes the goals seem too elusive or distant. A good implementation plan has some short-term wins built in. If stakeholders can see some positive and responsive changes quickly, they are more likely to take the harder and more long-term ones seriously.

We once had an organizational client in need of a major programmatic overhaul on all levels of their operations. In the midst of our interviews and focus groups, we discovered that, of all things, there were some bathrooms only opened on special occasions. It was a source of irritation, but most people had been reluctant to raise it publicly because they thought it would come across as too trivial. The CEO had his own executive bathroom and was totally unaware of the issue. When we pointed it out, it was corrected over-night. The next time we visited that site, the CEO proudly showed us the open bathrooms and many of the stakeholders pointed to it as evidence that they would be listened to. It created the necessary opening for folks to be willing to put the harder questions on the table. Small win – larger opportunity.

2. Early and consistent involvement by all relevant stakeholders.

In the non-profit/volunteer governed world, there are lots of stakeholders who can make or break a strategy plan. Contrary to what many may think, it typically isn’t the number of informants who need to be consulted but the inclusion of the right ones.

Any of us who have gone through this process is accustomed to skeptics arguing that we didn’t talk to enough people. Unless it is a small group such as a family or foundation board, any organization will have much too large a stakeholder population to talk to everyone. Regrettably, sometimes leaders hope to limit turmoil by precluding certain groups, individuals, or stakeholders. Or sometimes the process takes so long that those initially committed to the process have moved on to other committees or commitments.

Not long ago, I got a call from the chief professional grantmaker of a large public charity. Her concern was that, despite the fact that there was a very carefully developed strategic plan, the volunteer grants committee never seemed to feel bound by it when making grant decisions. The professional asked me how they could persuade the committee to follow the ground rules. When I asked if any of the committee members had actually participated in establishing those priorities, the answer was “no – all of the current committee folks came on board after these priorities were established.”

Is it any wonder that they didn’t feel any sense of ownership of those priorities? By not continuing to invest in the buy-in process, even these insiders felt no sense of commitment. Just imagine how disoriented the grantees or applicants felt.

Similarly, many organizations are concerned that there are swaths of the population they want to serve who don’t attend, join, use their services, take them seriously. Yet instead of finding ways to actually hear those people, they do top down planning – often based on what they heard at the most recent conference. In the process, they may overlook crucial undercurrents of the reputation of their organization which transcend their programmatic initiatives. Planning for and not with is not a formula for successful implementation. Which brings us to

3. Aligning the culture with the strategy – and vice versa.

Any who have used my philanthropy strategy method know that I am a big believer that the starting point of successful strategy planning is not “mission/vision”” but is an understanding of organizational culture, and the diversity of cultures/styles among decision makers and relevant stakeholders.

Some of this should be fairly obvious. An organization that supports or works with innovators is probably going to do better with a lean decision making process. An entity which has facilities for older folks is likely to have, and emphasize that they have, easily accessible facilities. A large community based organization which funds lots of subsidiaries and raises money from the broader community is most likely going to have a consensus and risk averse decision-making process. One would be surprised to learn otherwise.

In each case, it also defines who are not likely to see themselves as primary stakeholders. Start up entrepreneurs are not likely to look at “stodgy” consensus type organization as being a productive address. Millenials are unlikely to assume that an organization which emphasizes its physical accessibility for seniors has core competencies in attracting their peer group. Those who believe that we are living through a transformational and revolutionary time in history are not likely to assume that the large long-established multi-service address is going to be the most gratifying fit for them.

Culture is NOT the surface affect. Many organizations seem to forget: style is not a facebook page and culture is not a twitter handle. And a brand, no matter how much one invests in shaping it, is only what others think it is.

This is not to argue against the possibility of change. There are many examples of companies and organizations that have done so successfully. But successful change only can happen when there is no pretense that cosmetic changes alone are credible to new audiences and disaffected stakeholders.

4. Internal organizational culture matters at least as much – the role of leadership.

Some years ago, a manufacturing company contracted with me to try to understand why there was so much resistance to the organizational changes proposed by a previously utilized strategy company. That plan recommended moving operational decision-making to work groups throughout the company including the factory floor. It was a very reasonable plan. The CEO couldn’t understand why the work force was so reticent to make these changes. When asked, the foremen reported that the groups didn’t feel that they had real decision-making authority despite what the CEO claimed. It turned out that the CEO would choose to overrule the groups, which he himself acknowledged, but, he said, he didn’t do it more than 10% of the time. No one knew when he would intervene so no one felt that they really did have the authority he claimed they had. That cultural divide was proving very counterproductive between top management and those who needed to implement the plans. As the independent outsider, I was able to help implement a change which enhanced operational effectiveness almost immediately.

Another example, this time in the non-profit realm: the CEO espoused a culture of creativity. It turns out that not all “creatives” were created equal. The CEO’s own ideas always were the ones considered creative. Those of others were almost always belittled. How creative do you think that culture proved to be?

What these two examples underscore is the central role of leadership in implementation. If the top leadership isn’t walking the talk, it is very unlikely others will choose to implement very many strategic realignments.

5. Alignment of resources with the desired changes.

Especially in the non-profit world, people are the resource. Sometimes an organization may have developed great competencies in a field no longer demographically appropriate. Early childhood staff are not trained to be teen workers or to run film series. If there is not re-training of existing staff or investments in new staff, it is going to be quite a challenge to implement a strategic change from one field to another.

Similarly, facilities are not always easily adaptable. Early childhood spaces are not likely to serve adult lecture series. If all the “millennials” are living downtown, a suburban location isn’t likely to be appealing.

An example from my own teaching experience: because of space limitations, NYU regularly rents high school facilities for its evening courses. To put it kindly, not all of those spaces are consistent with a message of serving the population I teach: philanthropists and foundation professionals. To be credible to this target market, and to implement the purposes of the NYU Academy for Grantmaking and Funder Education required that the courses be offered in more professionally suitable settings. [I am happy to say that this did happen.]

Needless to say, implementation requires as much sensitivity, flexibility, and more long-term commitment than the initial development of a strategic plan. – and recognition that conditions sometimes require agility in adapting/modifying those plans as well. But with attention to these five components, there is a much greater likelihood that your own carefully wrought planning can be implemented successfully. And maybe you’ll be among those who will try and you’ll try and you’ll actually get some of that hard earned “satisfaction.”

There is NO Moral Ambiguity

September 10th, 2014

Richard Marker

This blog is usually dedicated to issues of phllanthropy. This brief piece is not. I hope you will indulge some thoughts on a different topic.

In my volunteer roles, as many of you know, over the course of my adult life I have been deeply committed to intergroup and inter-relgious amity. In recent years,that has taken me to leadership roles in the international inter-religious realm. I recently suggested to the board of an inter-religous group I used to chair that it was importnat to address what I perceive to be absolutely frightening and deteriorating conditions in much of the world. These next paragraphs are a proposed statement I submitted to them. Since it represents only myself at this point, I am posting it as an individual point of view. I hope and suspect, though, that the views are not mine alone.

The Board…. notes with shock and dismay the deterioration in civil and humane behavior in the name of religion in recent months. We categorically reject and repudiate any and all impositions of ideological religious practice or fealty which takes a life, involves torture, or dehumanizes others. In addition we consider it to be morally repugnant and religiously indefensible to ever intimidate or attack members of any defined group – racial, religious, or ethnic. There are no justifiable exceptions. We unequivocally condemn any who would advocate such behavior, even those who may share our own religious traditions.

As leaders, we surely recognize that there are matters of moral ambiguity in the political sphere which have led to sad and often counterproductive taking of lives and property. In our pastoral capacities, we offer hands of support to all who are victims of such hostilities and indeed we too may find ourselves more in line with one side than another. But recent history has witnessed offenses to human life and dignity about which there can be no moral ambiguity and must cease and be rejected by all. Our unified voice is clarion clear: this must stop.

We also recognize that those who act out of blind hatred or misguided destructive beliefs will not readily heed our call. But let our interlocked arms and unwavering commitment demonstrate that the world rejects their idolatries. We invite political, social, and religious leaders who share our convictions to join us in this fundamental commitment to humanity, and our plea, soon in our day, for peace for all.

Speaking Truth to Power

September 8th, 2014

Richard Marker

I am of the generation that protested the Vietnam War and marched for civil rights. Many of us were arrested or observed arrests of fellow protesters. Martin Luther King, and many others known and not so known, spoke “Truth to Power”. For many, especially at the early stages of those movements, there was genuine risk to life and liberty to do so. Many paid the price.

Some years later, millions of us wept tears of joy as Nelson Mandela was released from his long imprisonment. He, at risk to his own life, and manifestly to his own liberty, truly spoke truth to power. He certainly paid the price.

The list of those courageous souls who stood up to powerful forces as advocates for justice, equality, equity, freedoms is long. They can be found in every society, in every age, of every religious and ethnic group. They deserve our praise and encomia for having the inner strength to speak truth to power.

I thought of these examples recently when I saw an article praising a professional in the foundation world for speaking truth to power. It got me to thinking – what could that mean?

Those of us who sit on the giving side of the philanthropy table are the “power.” Ask any of those who petition us for grants, or have received them. Watch what happens when we do a “site visit.” Observe what happens at social gatherings.

Of course not every one of us has equal power, authority, clout, or influence. Some have more money. Some have more recognition. Some have more leadership skills. But where we sit represents power by definition – the power of money, decision making, access and therefore all of us have or are agents of power.

I recognize that those who are staff of foundations, and those who provide consulting and advisory services to funders have somewhat less direct power. Theirs/ours is more derivative. And there is no doubt, having sat in those chairs I can attest, that not everyone for whom we work always wants to hear our “truth.” It would be wrong to belittle the risks to reputation, or even income, that accrues to those who may feel that an outside of the box grant – or conversely – rejecting a favored one, may incur. For many it is easiest to say, “Well, after all, it isn’t my money” and go along. Indeed, I know of one long-time and successful consultant who has simply never given a client an answer he or she didn’t want to hear. [I am sure that you have already intuited that I am not comfortable with that approach, but, hey, he sure gets a lot of contracts!]

The challenge of making appropriate and constructive recommendations to decision makers, from the inside, is hardly the same level of risk as an outsider challenging the very values, structures, and even legitimacy of those very same decision makers. Sure, on the inside, it may require a deep breath, acceptance of uncertainty, and the risk of being shot down. In most cases, though, even those with the power to give us palpitations accept that it is our job to ask the hard questions.

Shot down is not the same as being shot at. Those who are really telling truth to power are those who have a lot to lose, a whole lot, and on whom many rely.

Those of us on the inside of the power structure should never forget where we sit. With very rare exceptions the risks we take are minimal compared to those on the outside looking in. So about that colleague whose plaudits led to this post: there are lots of praise-worthy and well-earned things to say about those of us on the giving side of philanthropy. But speaking truth to power is a compliment which should be reserved for those who are much more at risk than we.

What is Foundation Work Anyway? – A follow up to “Do You Want to Work in a Foundation?”

August 5th, 2014

Richard Marker

Amazing what one learns if one actually looks at “Google analytics”. After all this time, I finally did look. What I learned was that the post “Do you want to work in Foundation?” [31 May 2011] is among the most searched articles on this blog.

I wrote that post because so many who wanted “informational interviews” with me asked exactly the same questions, and had many of the same misconceptions about sitting on the funder side of the table. Even after encouraging people to read that, the number of requests for meetings continues unabated. [Now, a word to those of you who are new to this: I have more than enough sustenance already so your very kind offer to buy me coffee, breakfast, or lunch isn’t necessary. If it is appropriate for us to meet, we will find an appropriate time and place. I suspect that the same applies to others in the field.]

Back to our subject: what I now realize is that original piece was very useful at addressing misconceptions about work as a funder, but not very informative about what funders actually do all day. I trust I have already disabused you of the idea that all we do is sit around, think great thoughts about how great it would be to give you some money if you only asked us the right way, and spend the rest of the time spreading good cheer and dollars around, or, perhaps, sit around and think of ways to stress potential grantees out. At least, that isn’t what most do.

A. Program Officers. Actually the work of “traditional grantmaking” does often require a lot of sitting. To be sure, as I said in the earlier piece, one says “no” much more than one says “yes” but either way that determination can be a bear. Reading proposals, analyzing them, verifying background information, assessing the potential quality of this organization or proposal against the backdrop of their field or locale or discipline, weighing where this proposal might fit in the scope of our grants, and much more goes into every internal recommendation to whomever makes the decisions. Depending on the grantmaking entity, there may be detailed or summary write-ups, abbreviated or comprehensive dossiers, follow-up meetings or documentation with those seeking funds, communicating expectations and decisions, and, usually, managing those relationships, especially with those grantees which actually make it through the gauntlet.

Program officers or foundation executives may have differing styles, but it would be rare indeed to find one who is exempt from spending a good deal of time not actually dealing with the wonderful folks who will be implementing all the great ideas out there – you know, the ones that got you excited about being on this side of the table in the first place.

Don’t misunderstand – learning how to balance what many call the art and science of grantmaking can make a tremendous difference in the quality of the grants which you or your foundation make. But it is often hard work to get there, and, as I have written so many times before, one does not know the success of the project or the wisdom of your decisions until quite a way in the future. If one has one’s ego in check and a willingness to have a longer-term perspective, this can be a very gratifying role.

B. Project Manager. A newer paradigm is that of “project manager.” Many funders today have pulled back from open or competitive rfp’s. The funder/foundation already has done homework, identified those best able to implement a vision or aspiration or new idea. And most funders have developed trusting relationships with certain grantees. The nfp or ngo may be perfectly suited to implement a funder’s ideas so the work involved isn’t an assessment of a proposal or the organization but developing an understanding of and plan for how a collaboration or contract will be implemented. Foundations which follow this approach typically do their due diligence before the nfp is even aware that they are being talked about. Sometimes, the nfp may be brought into the discussion at a project-development stage. In any case, much of the assessment process described in “A” above regarding “traditional grantmaking” is obviated. Different skills and competencies are called upon here. Project management requires more interactive and interpersonal competencies, but it also calls for greater self-awareness and restraint. In a traditional grantmaking role, the power imbalance is clear but implicit. In the project manager role, the power imbalance is right out there.

C. Convener: As funders have become more committed to problem-solving than institution-building, many have assumed another role – that of “convener. “ This role can take many forms and there is a growing literature about emerging best practices.

Put most simply, a funder utilizes the credibility and influence which accrues to that role beyond that of “funder” by…

• Convening fellow funders can allow a coordinated approach to a place-based challenge or to a broader issue that has eluded simple solutions. The purposes can vary: formal collaborations, structured information sharing, identifying gaps or duplications in service.
• Convening grantees can inform funders about how coherent their funding practices are, where there are opportunities for mutual support and efficiencies, and how to address changing demographics.
• Convening experts can provide an opportunity for field building and expanding on best practices and emerging understandings in an area of interest to the funder.

The skills involved here are more in the realm of community building than the other two. It requires diplomacy, tact, diminution of institutional self-interest, and genuine empowerment. Analytical acumen and project management are always useful but hardly the most applicable when playing the Convener role.

D. Grants Manager. Once upon a time, this was a back office type – who kept things moving strictly behind the scenes. However, as more and more grantmaking is being done on-line, and as the process of systematic integration from proposal to grant to reporting to filing has become more prevalent, grants managers are increasingly a part of the team defining how a foundation presents itself to the world, what it looks for, how it assesses, monitors, and evaluates, etc. These skills often start with technology and can expand to grantee relations and priority setting.
E. General management, supervision, board relations, planning, budgeting, etc. are, of course, requisite attributes in a foundation setting. However, they are not that different than they would be in any organizational setting so there is no need to expand upon them here. I am also not expanding upon “impact investment” related skills, newer approaches which deserve a post all their own.

The work we do as funders can be great work and, especially at this time in history, the opportunities to be players in “making a difference” abound. Hopefully this post, combined with the previous one, will help you decide if it is for you.

Crowdfunding and the Detroit Water Cut-offs

July 27th, 2014

Richard Marker

Since the bankruptcy in Detroit has been extensively covered for months, and there has been widespread attention given to the complex and controversial role 9 prestigious foundations have chosen to play in helping to save its pension system, I will assume that there is no need to recap those developments here [although, if asked, I would be happy to weigh in in another context.].

The latest developments, also covered widely, have to do with the potential of cutting off water from many Detroit city residents who are behind in their water bills. In a case of victimizing the victims, there have been threats, so far deferred, to discontinue providing water to those who have already seen reductions of city services, unrelenting unemployment, and the literal erosion of their urban infrastructure.

My own view is that water is a basic necessity and that should be provided under the “safety-net” concept to those unable to pay – but that is not the primary subject of this posting.

What is the subject is a recent development which is both humane and troubling at the same time: a push for crowdfunding to cover those bills.

Crowdfunding is a broad term, of course, covering a wide range of activities largely through on-line vehicles. Sometimes it can be used for small venture or micro funds to individuals hoping to get just enough to develop a business to become self sufficient; sometimes it can be used for charitable purposes to pay for school projects, for example; and sometimes it can be self indulgent and downright silly like paying for potato salad.

On the surface, using crowdfunding to help the above-mentioned Detroit victims avert the water shutoffs is an appeal to the charitable and noble instincts of citizens everywhere. Rather than go through large and bulky intermediaries, individuals of limited means can help needy Detroiters receive a bailout directly through on-line vehicles. While many may not choose to enter into the political fray, or feel that they wouldn’t have the means or clout to make a difference even if they were to do so, it is hard to read of these pending cutoffs and not have feelings of sympathy – just as one might feel at times of floods, tornadoes, and other disasters, the difference being that this is human caused and not “natural”. If a gift of $50 or $100 can keep the water on, it seems an easy and correct thing to do. Such a gift is helping to solve a real, measurable, and preventable problem. Why not do so?

Those who respond to this recent appeal are exhibiting a true nobility. They don’t expect anything back, they probably don’t know and never will know the recipient, and can be confident that if enough people respond in a similar way, something very worthy will happen.

The real question, though, especially for those of us on the philanthropy/funder side, is this the way in which we wish to solve social problems today?

Should it ever have come to that? Clearly years of neglect and disgraceful public policy pushed Detroit over the edge. Undoubtedly the non-profit sector was on the scene and, from what I understand, has done exemplary work, some of which has been quite innovative. As public funding and reimbursables diminished, funders were called upon to do the impossible, to replace those public funds to keep the voluntary sector afloat. Further, it is also clear, in retrospect, that all too little of the funding which enabled those non-profits to function addressed underlying systemic issues. Or has done so very late in the game.

Thus individuals are quite justified in saying that the political and funding processes proceed far too slowly to help individuals faced with water cut-offs. [Should anyone feel otherwise, look how pokey the response to the mortgage disgrace has been; how many of those who lost their houses because of corruption and irresponsibility in the lending field have had them restored?] While waiting for appropriate conditions, trade-offs, political will, and self-serving players to all work it out, a new humanitarian crisis would exacerbate the existing crises. Surely crowdsourcing is more efficient.

Far more important, though, are the long-term implications. There was plenty of power playing going on when the 9 foundations came up with a limited bailout plan. And even then it is far from clear that the resolution of the Detroit pension crisis will have been equitable for those who will have been cheated out of much of their contractually earned pensions. And, if I read correctly, much of that current philanthropic intervention has still not addressed immediate systemic regional issues, despite their 50-year master plan. What clout does the individual cyber-donor have?

How easy will it now be for those who run public utilities and those who govern them to simply play a game of chicken – as long as individuals can be counted on to bail out the most needy, why do we need to do so? Let private philanthropy do what public policy and polity are unwilling to do.

I claim no special expertise in or knowledge about Detroit. I simply read what anyone can read. The absence of regional planning and governance, the evident and pervasive racism, the shortsighted and limited attempts at reinvestment and gentrification [recent exceptions notwithstanding] have all worked to keep a Detroit recovery from approaching what many other cities have done.

The increasing expectation that private philanthropy, both big and small, will accomplish what the private and public sectors won’t is not reassuring. It is not effective philanthropy, and even worse public policy.

Funder Blind Spots – Lessons from the Other Side

July 7th, 2014

Richard Marker

Every so often, I am asked to speak to fundraisers about the view of the funder. One such place, in response to “popular demand” [or so they tell me], once each year, I teach a full day seminar for fundraisers on this topic at NYU. This year’s seminar was held just a few days ago.

There is no doubt that many development and fundraising professionals are often surprised with some of the perspectives offered. There are “orthodoxies” which seem to be taught to many fundraisers that simply are either out of date or too simplistic to describe the current dynamics in the philanthropy world. In fairness to those who actually paid for this, I am not going to give a précis of my otherwise priceless presentation.

I do, though, need to honor some troubling issues regarding our side, funders, which arise again and again – and that do deserve attention.

When asked about what troubles them in their dealings with funders, fundraisers and non profit executives articulate two overriding concerns: inadequate transparency about process and priorities, and shortsighted grantmaking behavior.

1. Inadequate transparency about process.

I would have hoped that we were well beyond this one. In this day of easily developed websites and other affordable media, there really is no excuse for any foundation’s grants policies to be inscrutable. Even if a foundation does not accept unsolicited proposals, or has other very strict closed-door policies, people should know that. After all, if the 990PF is a public document, anyone at all can check out all sorts of things about the governance, finances, and grantmaking about any foundation. It is only reasonable, ethical, and good practice that a potential grantseeker should know if, how, and when they might explore becoming a grantee.

There isn’t that much about which people disagree on this very basic grade 1 level of funder transparency. If it is lacking, it is usually because of carelessness. As I have written in a piece on glass pockets some time ago, other elements of the question of foundation transparency are more disputed and negotiable, but not this one. If there are errors of omission, they can and should be corrected.

2. . Shortsighted Grantmaking:

Here, however, the plot thickens and the topic deserves some further comments – and judgments. A few examples:

a. Too little information on expectations.

When funders are either clients or take seminars with me, I underscore and emphasize how important it is to clarify expectations along with any grant or contract. If a funder expects an evaluation process or publishable findings or regular site visits or certain kinds of documentation or recognition, make that clear at the very beginning. It isn’t good practice, nor is it useful to assume that the grantee can intuit what you want. Sometimes our expectations are unreasonable, for all sorts of reasons, and it is better for a funder and grantee to have that straightened out immediately. In my experience, though, too often an issue manifests itself later on – when a funder has a vague sense of dissatisfaction with the experience only incidentally related to the performance of the grantee. Typically, it turns out that the funder was very unspecific about the kind of relationship they wanted to have with the grantee, the grantee never asked, and at the end there was unnecessary disappointment.

b. Unclear or delayed exit strategy

The best time to establish an exit strategy for any grant, investment, or contract is the moment one has decided to grant, invest, or contract. The very worst time is toward the end. Sadly, though, it seems that funders violate this all the time. In fact, it is probably the single complaint I hear more than any other. A few examples: “we were funded for three years and were never advised that they [the funder] expected us to replace their funding in whole immediately afterwards”, or “we created a new program at the request of a funder, invested heavily in it, demonstrated its success and yet the funding simply stopped,” or “we discovered only at the end that they wanted to compare the program they funded with us with similar programs they funded elsewhere, but never told us what kind of documentation they would want us to produce.” Sound familiar? In each of these cases, a funder expected or wanted something when the funding was over, and yet never adequately conveyed those expectations nor worked with the grantee to fulfill them.

In fairness to funders, we also are all too aware of grantees who act surprised when the writing was on the wall. Or who act as if once funded, they are entitled to it in perpetuity. However, I have seen too many funders who are guilty of the kinds of shortsightedness in their funding practice and communication that I suspect that there is real fire in this smoke.

c. Giving too little for a program to succeed

Funding for success is not the same as only funding successful programs. We all know that seemingly well-conceived and adequately funded programs fail or fall short for many reasons. That is to be expected, and any honest funder acknowledges that is the nature of our business.

However, there are too many times when funders are far too arbitrary about how much or how little they choose to grant. Instead of asking themselves whether the project they are funding can indeed succeed with the available resources, they use unrelated criteria to determine amounts. [“They asked for $x, we should therefore give less than $x” or “We gave a similar organization $y; we need to maintain parity”; or “last year we gave $z, we should simply adjust that proportionally to our grants budget.” Etc.]

In grantmaking, the challenge is not to see how little one can give but rather what is the right amount to invest for potential success. The overwhelming majority of place-based non-profits/ngo’s are not flush with extra resources and funds; if a funder knowingly gives an amount which allows a fragile program to be even more fragile, the funder is not doing much of a favor to the grantee, and as important, isn’t helping fulfill its own funding mission.

Many of my funder colleagues will rebut this, arguing that most proposal requests are padded, with the nfp’s expectation that, even if funded, it will be for less than the amount requested. This may be true a lot of the time, but if our own funding practices don’t align our funding with real costs, we run the risk of funders and applicants playing a less than productive game of poker. When we funders model that our grantmaking is based on best estimate of real cost analysis for likely success, we can and should insist on the same from potential grantees.

d. Abuse or misuse of implied power

Of course, ethics and best practices suggest that funders need to exercise due caution with their implied power. Hopefully every funder is well aware of self-dealing, and conflict of interest restrictions. However, the most typical “abuses” are inadvertent and well intentioned. I will give just one example: site visits.

Many funders, staff and trustees, love site visits. After all it gives one a direct experience with a grantee, or potential grantee. It adds vitality to the words of a proposal and can certainly be more dynamic than sitting in a plushy foundation office. There is good reason that a well-considered site visit can add significant information to a funding decision.

That last line, though, “funding decision”, is the key. If a site visit is going to make a difference to a funder’s decision, or gives a deeper understanding of what is actually happening with grant money, then, of course it is a constructive tool. [And there is substantial literature on how to make it productive.] However, if that site visit isn’t connected to decision making or monitoring, one should think carefully. Most funders neglect how disruptive a site visit can be to a non-profit. Desks are cleaned, attire is upgraded, work is interrupted in anticipation of these visits. Instead of delivering service, there will be talk about the delivery of service. You get the picture. But the implied power of the funder makes the majority of nfp’s immediately responsive to a simple request to visit even when it doesn’t make sense. Very experienced funders may, without meaning to, cause this disruption by the simple request to visit.

None of the issues discussed in this post are new or cutting edge. Nor is this an exhaustive list. Nor should any of this surprise. Yet, when one hears the same concern voiced by executive and development officers of large and small non-profits, over and over again, it is clear that we in the funding world still have work to do. As in so much of life, it is our blind spots that do us in more than our sins of commission.

All Grantmaking is Advocacy Funding

June 24th, 2014

Richard Marker

“What?” you say. “We don’t touch advocacy funding. We aren’t interested in having our foundation get involved in political issues. “

Sound familiar? Perhaps this one does:

“We only want to fund organizations and projects where we can follow our dollars. It appears virtually impossible to see the cause and effect of advocacy funding. Not where we want to be.”

Or perhaps this:

“We do care about public policy in the areas we fund, but it is so hard to know where permissible advocacy ends and forbidden lobbying begins that we stay as far away as possible. We don’t want to jeopardize our legal status.”

If any of these ring a bell, you are hardly alone. The vast majority of funders will give similar answers if asked about their feelings about advocacy funding.

This post does not attempt to rebut these objections. There is already a growing literature on how to measure the effectiveness of advocacy efforts; there is ample material on how to engage in perfectly legal and non jeopardizing advocacy funding; and we are fully understanding of a foundation board or an individual funder whose skepticism of the political process leads them to choose to fund outside of it.

What this post does address, though, is that it doesn’t matter what causes or institutions or projects you choose to fund; every one of those grants represents a kind of implicit advocacy.

Let’s be clear: the non-profit, public benefit sector is extensive. It includes huge museums, hospitals, and universities – and tiny start-ups, religious groups, and soup kitchens. Within the USA [not quite the same in other places in the world], our legal and tax system makes no distinction. Harvard may have an endowment in the $40B range, but a contribution to Harvard has the same tax status as a gift to a food pantry for the homeless. Legislators have tried to address this seeming imbalance, but they have found it impossible to determine consistent and credible distinctions. Harvard is clearly different than a food pantry. But what about a community college which serves a disadvantaged communiy? Is that more like Harvard – as an institution of higher education or more like a food pantry which serves the same neighborhood? What about a large multi-million dollar agency which happens to have a food pantry as one of its many offerings? There is much to be said about the legal issues here, an instructive literature which tries to consider ways to make useful distinctions and priorities in a radically revised tax system, and no shortage of affinity groups within our sector which have very strong opinions on this.

But what is less evident for funders is that each of our grants is a reflection of something beyond the law. Since no one – I repeat, no one – has enough money to solve every problem, every grant is a choice. Typically, for us as individuals as well as for grantmaking entities, our choices are informed by a wide variety of objective and subjective variables. What all too few funders consider is that one of those variables is an implicit decision about which sector should have responsibility for what.

Food Insecurity

An easy case is food insecurity/hunger in the United States: it is pretty demonstrable that there are more efficiencies in reducing food insecurity through SNAP type funding than supporting individual food pantries. But many place-based funders find it easier or more comfortable to support local food pantries than advocate for increased SNAP funding. At present, sadly, there is a need for both, but reliable and adequate SNAP funding might reduce the need for pantries, might allow redirecting voluntary grantmaking to other issues of poverty, education, or inequity. Funders who concentrate in this area understand the relative value of advocacy funding in this. Most advocate for increased public support for both practical and ideological reasons. Not surprisingly, there are those who on ideological grounds disagree with any pubic support addressing food insecurity.


One needs to step back a bit to contemplate the larger public policy issues of who should pay for education in the United States? Is it good public policy that the average middle class student must incur huge debt to get a college or post-college degree even from a so-called public university? Most other countries assume a very different stance on this question. In the USA, we might be bemused by protests in France or Germany about raising student fees by a couple of hundred dollars, but we make implicit public policy decisions when we choose to send money to our alma mater instead of to groups which might redirect public funding to make education more affordable. [And let us be clear: virtually every American university is funded through a mixture of public and private funds; the significant difference between public and private universities is governance.]

The development of the Charter School movement has exacerbated this policy debate. The creation of this hybrid model has moved the policy debate of who should be paying for what to the El-Hi realm when before it had been primarily a debate restricted to post-secondary education. Every decision about where to send one’s child or who should pay is an implicit advocacy position.

What about cultural institutions?

Are museums luxuries or an indispensible and integral necessity for the public weal? Many nations view cultural intuitions as a benefit owned by citizens for the benefit of citizens. And even in the United States we have such examples: the Smithsonian Institutions are open and free to all. Yet most metropolitan based museums are not. Some argue that such institutions, or public media such as PBS, should depend solely on private support. If they cannot appeal to users to pay user fees or funders to open their wallets, well – too bad for the public. Here too, whether a funder makes a purposeful advocacy decision or not, grants to such institutions make an implicit statement about who should pay for what.

Even religious institutions?

In the USA, there is a church – State distinction mandated by the Constitution. What it does or should mean continues to be an active debate but the basic public policy concept is well established: religion based entities, in general, are not eligible for public funding, but they, nevertheless, have an unusual and unique favored legal status: Unlike any other non profit, religious institutions are beneficiaries of a triple tax benefit. 1. They do not have to pay taxes on income. 2. They can offer a tax deduction for contributions. 3. And unlike any other, they do not even have to file a 990 tax return – thereby avoiding even minimum public transparency. [As I have written elsewhere, I for one believe that #3 should be changed.] It is useful to understand that it need not be that way. Many other countries have very different models, reflecting a very different perspective of the role of religion in the public sphere. Some actually allocate money to religious entities proportional to voluntary taxpayer self identification. Other countries offer no favored tax treatment for religious institutions at all. Wherever one may be, when one makes a contribution to a church, mosque, temple, synagogue, one is in fact endorsing a particular public policy approach to the role of religion and religious institutions. Here again, we are implicitly advocating a specific public policy even if all we intend to do is to make sure that our own religious institution can open its doors.

Taxes, anti-taxes, and private philanthropy

In recent years, this discussion has moved from the realm of interesting dialectic to pronounced policy. Many of us have written about the perverse attitude that any taxation is bad and that holding the line or reducing taxes is, by definition, good. Surely, no one wants to pay extra tax for corruption or inefficiencies. But most citizens rebel if the snow isn’t plowed or the garbage isn’t collected or the streets aren’t safe. All too many politicians decry “entitlements” such as social security or Medicare [immorally and disgracefully ignoring that those “entitlements” are contracts that millions of citizens have – and have had for years – with their government to guarantee their basic retirement security]. Instead of asking the question: What do we want our society to provide for its citizens, which is what taxes are for, all too many ask how little our society can provide.

The prevailing anti-tax sentiment creates an undue expectation and burden on private philanthropy. If there is not enough SNAP funding, non-profit giving is expected to make up the difference. If we choose not to provide an education system affordable to most, universities are expected to raise monies to provide scholarships or facilitate lending practices to make up the difference. Even El-Hi schools now must raise private funds for activities, supplies, and outings. And even if there were to be enough voluntary support to make up the difference, is it the role of private philanthropy to cover what some decide government no longer wants to do?

There is much more to be said, but the bottom line is this: every voluntary contribution one makes is a choice. Most of us make those choices weighing one worthy claim against another. We know that we are making implicit judgments of what matters more to us in the competition for our discretionary charitable dollars. It is crucial, as well, that we not forget that we are making another, although often unarticulated, choice as well. What do we believe is our responsibility and what is society’s writ large– i.e., the government’s? Those choices, and the choices of others, imply an advocacy for a set of values and priorities by which we all will live.

Panhandlers – What Should One Do?

June 22nd, 2014

Richard Marker

25 years ago or so, when I was still living in Chicago, I was approached near my office in the Loop by a man asking for money to go to the hospital. I immediately hailed a taxi, gave the driver some money, and asked him to take the man to the closest emergency room. Not even 2 minutes later, the driver came back to say that the man didn’t really want to go to the hospital but wanted to share the money I gave the taxi driver. I gave the driver a tip and he drove off, the man went on his way – presumably to try that ploy again, and I continued about my business.

Yesterday, one of the most prolific bloggers in the philanthropy space, a colleague and friend, Dr. Gray Keller, published a challenging piece on how one should – or perhaps, should not – respond to the abundance of panhandlers prevalent on the streets of Manhattan. He argues, legitimately, that there is simply no way to know which of them are in authentic need and which are charlatans and cheats. He went on to suggest that those in need had viable options for care and thus he felt no remorse in holding his head high and walking past them.

I confess that my own behavior is the same as Dr. Keller’s but I am not as guilt free as he. I surely have no disagreement with his assessment that there are cheats and swindlers. And it is virtually impossible to know for sure who is and who isn’t. But I also know that our safety net has become far too porous. Job retraining, safe shelters for the homeless, support systems for those with deep-seated emotional disorders and secure places for the abandoned are all harder and harder to come by. And, if we are being honest, let’s face it, even those who are using subterfuge to panhandle from strangers are hardly living an enviable life.

Traveling on the subway and walking down the street does create a dilemma. Can we give to one and not another? How much is the right amount? If one doesn’t give, what should one do? Advocacy? Volunteer? Contribute to organizations which deal with the street population? Care more?

This morning, on an errand, I stopped by one of the Starbucks in my neighborhood. When I walked in, the barista immediately asked if I want my usual. It made me realize that it may be Manhattan, but it is my Upper East Side Lenox Hill Manhattan – a small slice of a very big place. The dry cleaner knows me, the doormen on the way to the gym always say hello, the check-out people at Citarella know me well enough to ask about my menu for the evening, our barber is on the corner, my tie and pocket square boutique is just next to the barber, even the bankers at our local Citibank branch know me. The anonymous big city? Hardly.

Yet everyday, I walk past the same homeless people blanket-clad in the doorways of the shops closed for the night, or huddling behind the pillars of St. Jean’s Church, or sprawled on the subway platforms. Those people don’t know my name, nor I theirs.

Now, though, as I think about it, all of the excuses for not dong something melt away. Clearly these folks are not running off to some secret penthouse with hard-won subway begging strategies; they may be nameless but they are not strangers, they are in residence in one of the most exclusive zip-codes in the country without bothering people except for their disheveled appearance. What excuses do I really have for averting my eyes and walking past?

I spend my life in this philanthropy space. I am paid to address major trends and to help folks develop more effective decision-making giving strategies. And I try to back up this with thoughtful philanthropic giving and volunteer involvement of my own. No doubt I am doing my part on the big picture; the question remains, though, am I ignoring the everyday philanthropy that can improve some people’s lives – some very real people – in an instant? I have to admit, I am hardly guilt free in my own philanthropic behavior.

Innovation Funding IS Strategic Grantmaking – Some Responses

June 18th, 2014

Richard Marker

It is always gratifying when one of these posts inspires reactions, challenges, and rebuttals. The post of several weeks ago on innovation funding seems to be one of those. This follow up piece addresses some of the reactions I have received.

Evidence based grantmaking: Some have read my earlier piece as a wholesale dismissal of the value of evidence-based grantmaking. That is not what I meant to imply. There are, indeed, many cases where there is significant documentation that one intervention is more effective than others. In addition, many funders and foundations don’t have the internal resources to do independent research or assessment of complex approaches. They are “mission aligned” with a much larger foundation which has done that work. Why not follow their lead? This can be a very efficient funding approach and can have a legitimate place in a grantmaking portfolio.

Moreover, even though not every evidence-based approach would withstand a longitudinal review, it does not mean that every unproven or untested program or intervention is equally worth funding. It does not exempt a grantee organization from an articulation of what success should look like, what an evaluation could examine, and what they would do if their assumptions prove false. All of us have met organizations – new and not so new – that have tried to dismiss accountability. “We are different” or “we have wonderful anecdotes” or any of a variety of other rebuttals. Those responses are simply not credible. Innovation funding requires openness to uncertainty, high tolerance of failure [see below], and acceptance of early stage indicators rather than clear evidence of success. But innovation funding does not dismiss accountability, knowledge of the field, or acceptance of the legitimacy of the early-stage indicators.

Replication: Another area which only makes sense if there is demonstrated effectiveness is the area commonly referred to as replication. Replication is NOT simply copying something tried in one place and plopping it down somewhere else. That is in itself a recipe for failure. How often have we seen that? But a program, approach, or project which has been tested, and, crucially, there is appropriate documentation about what made it successful, is a good candidate for “replication.” Here is another example where evidence matters.

Finally some words about success and failure. Recently, a lot has been written about failure in our field. It is hard to imagine any funders who are honest with themselves who can look at their portfolio over time and not find some flops. And that is as it should be. After all, virtually all funding is for something that did not yet happen. Nothing in the future is or can be guaranteed.

But failure should never be because a funder got in the way: created undoable conditions, knowingly underfunded, forced an organization to go beyond their reasonable competencies, overlooked organizational weaknesses which needed to be addressed…

I continue to be an unrepentant advocate for the importance of innovation funding. Funding innovation requires a high tolerance of failure. Sometimes a huge tolerance. But that failure should be for the right reasons and not because of funder myopia. And this is where strategy enters: asking the right questions, articulating what change might be possible, being courageous in helping those changes happen, and being responsible in your relationship with those who are implementing those noble efforts. What can be more strategic than that?