November 11th, 2019
Reader alert: This piece, as #354 and #355, has a clear public policy point of view that many will find political.
One cannot be in the philanthropy world, the financial management industry, or the demographic field very long without hearing about the massive multi-trillion-dollar transfer of wealth. The amounts to be transferred from generation to generation boggle the mind. Surely it is so great to be transformative.
While I am neither an economist nor a wealth manager, I have no doubt that those numbers are derived from real data. I also have no doubt that wealth managers are hyperventilating over the fees that will accrue when these monies are invested, and fundraisers for both nonprofit and for-profit funds are salivating in anticipation. [I am only slightly exaggerating but in conference after conference, I see their evident enthusiasm.]
More relevant is that I am absolutely sure that some heirs and their families will be well cared for, as they used to say a century or more ago, “beyond the dreams of avarice.” But only some, and that’s the point.
If the transfer were in anyway broad-based and really likely to raise the living standards of everyone, the demographic projections wouldn’t be as bleak as they seem. Why is it that whole swaths of millennials assume that they will not achieve the financial security that their parents had, that they see home ownership as elusive, that they wonder how health care and social security and college loans will be paid for? And what about all those McMansions that were supposed to be guaranteed nest eggs that are now waiting and waiting for buyers?
Even after one of the longest economic expansions in history, middle class incomes are barely covering what they did a generation ago and certainly don’t reflect this great run-up in stocks or provide cushions against emergencies.
Now, let’s turn to the philanthropy piece of this: Initiatives like The Giving Pledge [full disclosure, I have a very peripheral connection] are intended to give some of those billions a place to do some good. And some of the signers are being very proactive with their funds to expand their giving to non-profits or at-risk populations or systemic social issues. But many who have committed at least 50% of their net worth to philanthropy have chosen to fulfill their pledge by funding their foundations upon their death. Far be it for me to malign that decision, but let’s be honest, that means that in many cases only 5% of that money will be distributed on an annual basis and only at some uncertain time in the future. That counts and that money is certainly important but hardly a game changing transfer of wealth to the non-profit sector. To date, sad to say, under 300 billionaires have signed on. There are many others who have yet to announce their intentions.
When looking closely at this massive “transfer of wealth”, it becomes ever more evident that it is a boon to the already wealthy, and a smidgeon to the vast majority of the rest of the population. If there has been an inordinate, and morally dubious, concentration of wealth in the hands of an ever-shrinking percentage of the population over the last years, this transfer is destined to intensify and solidify that oligarchy.
There are some public policy strategies that can help that transfer be more widely enjoyed. Most of these do indeed have an impact on the highest net worth among us; none of these will have the slightest impact on their lifestyle. I am sure that these 7 are not an exhaustive list, but I do feel that together they may begin to redress some of this accumulated equity imbalance:
1. Eliminate the cap on taxable earnings subject to social security tax. That is the single most regressive tax – with a much greater burden on lower- and middle-income earners, and an exemption to the highest.
2. Tax capital gains at the same rate as other taxable income.
3. Support some sort of guaranteed medical care for everyone. I doubt such a national insurance policy will ever come close to what congress grants itself or what top executives in the corporate sector receive, but it is an inequity widely written about. [I am purposely not applying terms such as “Medicare for all” or “Obama Care” etc. They have become so loaded and weaponized that it is impossible to discuss the true underlying issue.]
4. Support policies that restore SNAP funding to levels that make the measurable difference in reducing food insecurity for children, the working poor, etc. Studies show the impact in the workplace, in school performance, and in public health when the population receives adequate nutrition – or doesn’t. The financial return to the society as a whole will more than outweigh the short-term public expenditures.
5. Support a minimum wage that doesn’t guarantee continued poverty. Assuming that the working poor can actually live on $15/hour in almost any municipality in the USA is willful neglect. The deteriorating impact on society of the growing homeless population, even of people working full time, is measurable. We can argue about employment statistics, but it is unconscionable that those numbers are on the backs of full-time workers who can barely afford housing.
6. Support the development of reliable, regular, and widespread public transportation. Those without access to public transportation are fully reliant on private automobiles. For many, that is the second largest annual expenditure after housing. And, needless to say, that impacts lower income folks the most. If one can provide the kind of public transportation taken for granted in many parts of the world, it would immediately provide an increase in net spendable income, reduce the palpable tension in the workplace caused by driving to and from work [according to several studies], and help to sustain engaged community involvement [that has dropped precipitously over the last 2 generations].
7. Restore Pell Grants and the equivalent to the levels they were originally intended. When developed, they were the second most significant source of higher education tuition funding [after the GI Bill]. Millions of lower middle-class people earned college degrees through those grants without incurring back-breaking debt. As those grants have been eroded over time, they have moved from being the “leg-up” to just another bureaucratic burden with minimal return. Simply restoring those funds to the level they were originally intended [inflation adjusted] would make a huge difference in reducing the $trillions of debt too many college graduates carry.
Now, of course, while some of this will require increases in taxes, let’s be clear -that is why we have taxes. “Tax” is not a dirty word – taxes are how we express our individual commitments to having a functioning society. An equitable tax system, without undue breaks for those who need it the least, is the truest form of a “trickle down” economy.
Now I know that some lobbyists will argue with every one of the 7 points, and I am not so naïve to think that whoever gets elected will find it simple to enact public policy that easily. But I do call upon those who will be the primary beneficiaries of the much-celebrated massive wealth transfer to lead the way. For most, it will be painless.
Several years ago, I was meeting with a very wealthy family in another country. The scion, the oldest of Gen-2, told me that he and his peers felt very bad that so many people in their community could not afford the kinds of wedding celebrations that they had. Did I have any thoughts on how they could address that social stigma and provide the less wealthy with the kinds of weddings the wealthy took for granted? I asked this fellow if he and his fellow wealthy had ever considered toning down their own over the top ostentation that only reinforced the wealth divide and played into that very stigma. It would reduce the social pressure and the need to create an entire funding enterprise. It had never occurred to him or his peers. It caught him off guard to suggest that their behavior sets the standard that leads to that perception of inadequacy and that they might have a role to play in reducing that divide.
Perhaps it is time for those whose wealth exceeds any possibility of human consumption to ask themselves that question. It might make a modest increase in taxes more palatable, and it might lead to a level of empathy that would change the social discourse in less judgmental and patronizing ways.
And ultimately make that transfer of wealth something all can celebrate.
November 9th, 2019
November 4th, 2019
Reader alert: This post, as in #354, has a very clear political point of view, at least at the beginning. You may wish to read #354 prior to this one.
This piece is difficult to write since I have so much disregard and antipathy for the current administration. An article advocating a crucial role for government, as this one will, must therefore take a leap of faith that some sense of normalcy and affirmation of civil society will return to the United States in due course. So, onward….
Since the Reagan years, politicians have been running on the concept that taxes are bad, and that government shouldn’t be expected to provide for its citizens. [except of course for their own very generous benefits!] Many others, especially in the private, for-profit sector, argue that the profit motive will almost always prove a more reliable incentive than altruism and will do so far more efficiently than the government can.
Well, it is not hyperbole that we as a society are paying a huge price for these years of cutbacks. Students haven’t been taught about the Constitution and rank well below the top 10 countries in tested learning; frighteningly large segments of the society believe that science, including on climate change, is merely political opinion; homelessness is on the rise throughout the country; the US healthcare system – yes that famous private system – is the most expensive in the world with far too many inadequately insured, and there are still those who believe it should be exclusively a private responsibility…. And it isn’t getting better.
As a quondam educator about the history of American philanthropy, I would be the first to acknowledge that the issue of who should have responsibility for what is as old as the US, and people can have legitimately differing opinions about which sector should be accountable for which parts. And there is a long and legitimate tradition of those in our philanthropy sector who will affirm that private philanthropy’s value added is that it need not be bureaucratically handcuffed, that it can respond to needs without political interference or a plebiscite, and it can take risks that government cannot and should not take. The idea of private philanthropy as society’s risk capital is a continuing and honorable theme.
There is certainly validity to those arguments – as far as they go. They fail, in my opinion, when they make two derivative arguments: that in the absence of government funding, private philanthropy should fill in the gaps, and that private philanthropy has the capacity to do so.
It is hard to overstate how the latter arguments are flawed. There are many “proof texts”: The largest private foundation in the world has an endowment of about $50B with a grantmaking budget of about $5-6B; compare that with the budget of the NIH – itself having suffered cutbacks over the years: as of this year, its annual budget is over $30B.
Or to put it another way, if those in the congress who wish to cut SNAP funding – the most important public initiative to reduce food insecurity – were to have their way, the amount of cutbacks alone would be greater than the sum of the endowments of all US foundations. Examples abound.
Or to put it another way, a private sector company worth $50B would be so far down the list that it would only be the 110th largest company in terms of value. And very few of the other top foundations would crack the Fortune 500 list. Imagine the naivete in thinking that this sector can have the resources to solve society’s systemic challenges alone or replace government funding.
It is true that foundation funding trails individual giving, so the true capacity of private philanthropy may be greater than this. But, even so, nowhere near the need.
But even if it could, the real question is: should it? After all, the very nature of private philanthropy is that it is not accountable to a plebiscite and that it has no obligation to respond to all of society’s needs even when not popular. There is nothing, other than good will, that would guarantee that the highest risk populations are not forgotten, or that there would be socially responsible standards for health, education, and more. If history is any indication, many of the wealthiest are perfectly happy to give their largest gifts to the most secure and prestigious organizations, universities, museums, and hospitals – and to underfund others. [Yes, I know these are gross generalizations and this giving is under severe attack in some circles, but the long-term numbers bear out the generalizations.]
Do we really want a society where retirement funds are fully subject to our own private investment acumen? That our health care depends on how much we can manage to pay and too bad for us if we cannot? That educational institutions only offer art or athletics or specialized attention if they are in wealthy neighborhoods?… In a country with 350 million residents, such a financially driven system of human services and health care and education is morally suspect and of dubious efficacy.
What about our role, then? We do have an obligation to fund that which government is not yet willing to do such as take risks, advocate for systemic solutions, utilize our unique vantage of not being subject to quarterly reports or biennial election to fund over time and with limited political overhang. We have the ability to bridge sectors, to develop new models, to leverage our resources even if they are more limited than many assume, and to be a moral voice of values.
Not all of us will agree on how to use our resources, for what we should advocate, who should be allowed to decide, and what the ultimate role of government will be in all of this. But we, more than any other sector, should be able to model those dialectics in ways that ennoble our society, despite or because of our disagreements – quite the opposite of the denigrating cesspool that surrounds the current administration.
Government funding alone won’t solve the morass we are in but honoring the legitimacy of taxes is a start. And, let’s be honest, if our sector doesn’t acknowledge our ability to help influence those policies, policies that reinforce why we exist and what we can do, then we are only playing into the hands of those who would either trivialize our role, or worse, magnify it beyond comprehension or credibility. Either way, we, and society as a whole, will be much the worse for it.
October 22nd, 2019
Reader Alert: This post and the next have a pretty clear political point of view.
In June, the regional association of grantmakers, of which we are members, sponsored a conference on Census2020. The challenge of every census has been to produce as accurate a census count as possible so that allocation of federal dollars and Congress can reflect real needs and proportional representation. The Census Bureau readily acknowledges that certain at-risk communities are consistently undercounted, meaning, of course, that certain wealthier – and, not surprisingly, whiter – communities are over-weighted.
Next year’s census is even more challenging and is the first where an Administration has overtly tried to politicize it. Fortunately, the Supreme Court called them on it and didn’t allow a rogue question on citizenship to be a last-minute question on citizenship. Nevertheless, the damage was done and those who have developed a distrust of the government’s actions and intentions appear likely to be reluctant to participate regardless of the status of that single question.
There are many subsets of America to which this applies. Persons of color, immigrants, Hispanic and Latino populations, Muslims, those who don’t own their own homes, non-English speakers from anywhere are only some of those identified. Recognizing how crucial these numbers are for accuracy and equity, the philanthropy community throughout the United States has mobilized to help get as close as possible to full participation. June’s conference tried hard to avoid research abstractions and to focus explicitly on “interventions that work.”
Here is the kicker, though. The conference invited panelists on whom the success of these interventions depends. They are trusted intermediaries such as clergy, community leaders, social service workers, immigrant aid attorneys, and more. What we heard was that many of them were, themselves, reluctant to push their constituents to fill out the census forms. Given this administration’s abuses of personal rights, the outrageous tactics of ICE, and the assumption that there is no such thing as confidentiality as far as the government is concerned, these influencers were not prepared to put their own credibility on the line. And while they acknowledged that there has always been some of this sentiment, there was absolute agreement that the current administration breeds a level of fear and distrust among the populations who are most in need of the resources the census will yield beyond that ever seen before. People are in hiding, if not literally certainly in their willingness to comply with anything that might identify them to the government. [A reminder that the next 10 years of government allocations will rely on these numbers!]
This level of distrust is profoundly unsettling. Many of those of us who are funders sitting in those sessions were deeply troubled. The philanthropy world can assist, enable, and support local entities but very few of us are known by or are credible to the folks in the at-risk communities so if our efforts are to succeed, we need those trusted community leaders. If they are hesitant, how can or should we use our resources to address authentic issues of equity that really matter?
This post is not to provide an answer to that question but rather to show that the “trust” issue even includes us.
Which brings me to a consultation I attended yesterday, sponsored by the same regional association of grantmakers, addressing issues facing immigrant communities and an attempt to articulate ways in which the philanthropy world can make a difference Many of the issues were re-articulation of the Census2020 conference, and migrant issues will not soon go away as we have yet to address climate enforced migration that will only grow. Only an ostrich like administration can pretend otherwise.
The last question the panelists were asked was how we funders can help. There were a number of focused financial proposals, but then their answers switched to how we should or should not behave. For example, they argued, even if and when we sponsor convenings, we should absent ourselves. These groups felt that they would be too vulnerable to expose their authentic challenges, to reveal their failures, and to admit to the implications of the consistent pattern of underfunding they face.
Put simply, they don’t trust us. No, not in the way they distrust government misbehaviors but, rather, for our inability to keep our privilege in check, our power under control, or our attempts to enforce our perceptions of what they should do. These were not unsophisticated panelists who never deal with funders all the time; in some cases, they do so with real success. Yet their sentiments were unanimous.
Many readers, I know, are scratching your heads. Hasn’t our sector bent over backwards in recent years – for example, to understand how we are perceived or to engage grantee stakeholders in our decision making? These attempts were not mentioned by any of them. Whatever we have been talking about in our conferences, in our periodicals, in our classes don’t seem to have made their way into the perceptions or real-life experience of grantees.
We are paying a price, some of our own doing, to be sure, but even more by a generation or two of dissing the efficiency/efficacy/ethics of all institutions. Like it or not, whether we are on the left or right side of the political spectrum, philanthropy is part of the power landscape and our motives are perceived to be as suspect as the rest.
I don’t want to be simplistic about any of this. There are deep systemic injustices and inequity. Many of us have, directly or indirectly, been the beneficiaries. Our roles going forward are not simple [see my subsequent post expanding on this question.] And I certainly want to acknowledge the work of so many colleagues who have tried hard to make honesty and trust possible, who have listened hard to the often sobering feedback about our affect and procedures, and who have made genuine attempts to redesign funding strategies to be more authentically responsive and participatory.
But yesterday’s session underscored how far we have to go. And I don’t just mean in our grantmaking.
A healthy civil society can only exist when there is trust. It shouldn’t be blind trust, but it does require trust earned by some institutions, some people, some sectors. We in the funding world have a particular responsibility since our funding, our advocacy, and our affirmative sustaining of institutions are indispensable. No, we cannot and must not pretend that we can do it all, that we alone can correct years of sewn cynicism, or that we can easily break down the inherent power imbalance that defines us.
We must, though, learn how to make the difference at a time when there are deep breaches in belief that any institutions have the best interests of their stakeholders at heart. We need to earn their confidence that we mean it.
No, we cannot do it alone, but it cannot and will not happen without us.
October 16th, 2019
Over the last few years, the underlying ethical challenges that all of us, on both sides of the philanthropy table, face have surfaced because of far too many abuses and embarrassments in our sector. Sad, indeed. In its most recent issue, the Chronicle of Philanthropy focuses our attention on those ethical dilemmas faced by fundraisers. As most readers know, my own work on philanthro-ethics focuses on the other side, on the ethical responsibilities on the funder side of the table but the issue that stimulated this post goes back a few professional incarnations ago.
As many of you know, before I was on the funder side full time, I had a long run of executive roles on the nonprofit side. Those roles well positioned me for what I have done for the last quarter century as a funder: executives in the nonprofit sector are faced with choices between breadth and depth, the recruitment and support for professionals with great responsibilities with all too few resources, the need to understand competing stakeholders, and balancing the measures of short term successes with long term impact are all the daily work of non-profit CEO’s. Sounds a lot like the issues we funders have as well.
In the early 80’s to mid-90’s, I had CEO responsibilities for many programs with their own facilities. None of them had deferred maintenance funds, most were inadequately designed or too small for their current and projected utilization, or simply needed to be replaced, and the expansion of our system called for several new facilities. This challenge was not unique to the Hillel Foundation – it characterized a huge swath of nonprofit facilities from universities to churches and everything in between. All too many were built in the 40’s, 50’s, and 60’s by institutions so happy to get capital gifts, any capital gifts, that they never planned for or insisted upon the long-term needs of those facilities. But just because it was not a unique problem didn’t make it any less urgent. [Much of this has changed as many more funders are willing to provide much larger capital gifts to all sorts of institutions with greater sophisticated understanding of what longer term needs are.]
In another context, I would be happy to write more extensively about how we, largely successfully, managed this and set up the conditions that would preempt these capital challenges from continuing into the future. Below I mention one. But for this post I would like to tell only about one approach that I found easy to dismiss at the time but wonder how one might respond today.
One day, someone scheduled an appointment to discuss a proposal. This fellow, whose name I have long forgotten, had developed a particular expertise. He facilitated getting bond funding for non-profit organizations, especially those whose size put them below the normal bond radar. While our needs were in the $m’s, he would fold “our” bond request into a much larger public bond offering of a much greater amount. These publicly issued bonds had low interest rates and would provide all of the capital we needed for re-hab and construction projects in one easy step. Universities and hospitals and other large institutions do this all the time; no reason, he argued, why relatively smaller non-profits shouldn’t benefit as well.
But here was the kicker that turned me off immediately: when I pointed out that I couldn’t see how we would be able to repay the bond amounts in a timely manner, he tried to seal the deal by assuring me that the bonds would never really have to be re-paid. If memory serves, he said that bond holders understood the risks when buying the bonds and they would be very unlikely to come after a non-profit like ours for non-payment.
It struck me at the time as more than a bit sleazy and I politely thanked him and let the proposal finds its way to a circular file. Eventually, we did get the capital for most of our projects, and by then the board and I had developed a policy that no capital project would be accepted without an accompanying endowment. [Whatever one thinks about endowments in general, it is clear that facilities have new, predictable, and substantial costs over time that should be accounted for from the very beginning. It was a gutsy but persuasive policy that worked.]
It is now well over 3 decades since that episode. In my current roles which are now restricted to the funder side, I teach about using PRI’s to accomplish philanthropic goals. To remind those who may not be familiar with the term, a Program Related Investment is money taken from the grants side of a foundation’s ledger that can be given with the desire for or expectation of a financial return. That might be an investment in a for-profit firm aligned with the grantmaking mission of a foundation or it can be a loan to a grantee. A straightforward example of a PRI: a non-profit has a short-term cash flow crisis for any number of legitimate reasons. A foundation chooses to lend the non-profit sufficient capital to tide it over at very favorable terms. If the anticipated money comes in to the non-profit, the loan is repaid. A foundation then must re-grant that money within a certain time frame. But should the non-profit not repay the loan, the foundation must reclassify that loan as a “grant” to that non-profit. [There are more technical issues, but for our purposes this example should suffice.]
In thinking about PRI’s, I began wondering if there might be a similarity between a foundation PRI loan and a public bond. Both are for public good, both provide funds that a nonprofit desperately needs, and both carry the risk of non-repayment. [Bonds are rated according to that risk.]
To be sure, there are very different decision-making processes, different stakeholders, and different legal requirements. But in many ways there are more similarities.
Now let it be said that in the example I gave, the sleaze factor was quite relevant. It seemed ethically problematic that the sales pitch so quickly affirmed that one could take these funds and not feel any repayment responsibility. From my perspective at the time, that was an ethical non-starter.
But given what I now know about PRI’s, I wonder: was I so blinded by the sales affect that I ignored the potential effect? Had I underestimated that the bond raters and the bond buyers would do their own due diligence to determine if we would have been worthy? Had I not overlooked the pattern of philanthropic giving that rewards success – had we demonstrated success in our massive [for us] facility projects might that have changed the giving level of current and potential donors, perhaps making those repayment obligations less elusive? Had I applied a sincere but irrelevant ethics screen that delayed much needed upgrades to our facilities and service systems?
Of course, PRI’s were not very evident in those days, and hindsight is… well, you know. During my time in those executive roles, there was a long litany of ethical, moral, and even legal issues that required a clear ethics grounding if I were to do my job responsibly; if my antennae were too sensitive in this area, it was because I required them in many others.
However, ethics, unlike morality, is often choosing between two credible and often legitimate options. I now wonder if I was too quick to see only one.
October 8th, 2019
It is said that if one hears something once, it is an anecdote; if twice, it is coincidence; if thrice, it is evidence. Whether or not that evidence is convincing to researchers or evaluators, three identical conversations within a two-day period does suggest that there is something to talk about.
Last week, I attended the annual Exponent Philanthropy conference. I have lost track of how many of these I have attended – going back to the early years under its prior name Association of Small Foundations – but I can attest that it is always one of the best conferences for funders in which I participate. This year my role was strictly as a participating member so the conversations I am reporting were all serendipitous around dining tables [although, it is only fair to say that those with whom I spoke were aware of my expertise in the family philanthropy area] .
The questions were remarkably aligned: when and how should we engage the next generation in our family philanthropy. It is often a challenge – What is the correct age? How to involve them in decision making? And the like.
Interestingly, the conversations all posited a similar approach. “Let the younger family members research some projects and report back to us.” The arguments were of two sorts: this would be a good educational method and/or it is a way to prove their readiness. When I asked their ages, the next gen folks were all in their 20’s and 30’s. I responded, “so you are giving them homework assignments – but not a vote.” In every other way they are grown-ups, perhaps with careers and families, but in these families they are still given homework assignments and not ready for the grown-up philanthropy table. [“Next Gen” isn’t always age related, by the way. In a few situations in which I have been involved, the “next gen” were in their 60’s and still not given autonomy or a real vote!]
There were a couple of differences in the family situations: in one case, they were concerned that the next gen folks simply didn’t care. Their evidence was that they were not interested in “doing the work” involved. In the other cases, those who spoke to me were concerned that they were sensing some resentment that their offspring were only allowed to propose but not considered full participants in decision making.
When I suggested to each of the family groups that they experiment by giving some discretionary giving authority to their offspring, they all responded as if it was a new idea. This is certainly not a profoundly innovative suggestion; it assumes that folk are much more likely to feel a sense of ownership and responsibility than when they are disenfranchised or implicitly infantilized.
Of course, this approach is not without its challenges: it wouldn’t be a surprise if not every successor agreed with their elders about priorities or style or even values. For those who are the founders, or those who finally got to sit in the decision-seats themselves, these challenges can make them reluctant to let go. Better to stall and hope that, as time goes by, the succession will somehow be pain free. But if families are truly committed to engaging those next generations in their philanthropic commitments, enfranchisement is really the only option. [Yes, I know I am simplifying a whole range of complex family relationships in these few sentences, but the principles are pretty much generic even if their implementation may not be so simple or straightforward.]
The other frequent question has to do with when: If young adults are, generally speaking, old enough, what about teens? Aren’t they used to doing homework? And even be graded for it? Am I really suggesting giving them discretionary privileges over some grantmaking decisions?
Youth philanthropy has become a fast growing subsegment in our field. There are community sponsored teen giving circles and there even courses in high schools where students are given authority over considering and deciding among direct giving proposals. Why not extend that to your family giving as well? The discretionary dollar amount should be smaller, but the conversations and the insights may well prove intriguing, to say the least. After all, we have been reminded this summer that a 16-year-old high school student has had the most eloquent voice in climate change discussions – with more clarity about the existential choices we face than any adult political leader! I suspect that families who want their philanthropy to transition between generations would do well to find their own ways to take their teens seriously.
Now, these comments should not be viewed as the single solution to questions of succession, eligibility, or longevity. As suggested above, every family and every foundation have distinct histories and distinct cultures. And the more people and more generations involved in successor generations the more difficult the enfranchisement process becomes. But sometimes simple proven solutions can make all the difference. For the three families with whom I spoke at Exponent last week, it appears that this single change might well address a growing intergenerational dilemma.[In reviewing this before publication, it seems appropriate to add this postscript. Our field in in the midst of a robust discussion about the legitimacy of transferring wealth between generations or of the continued exercise of privilege that accompanies it. In other settings and posts I can return to these questions of equity. Nevertheless, the issue of engaging successor generations in family decision-making regarding philanthropy even if there is no formal structure can apply regardless of the depth of one’s pockets. These lessons can apply independent of the larger public policy issues we must certainly continue to examine.]
September 12th, 2019
Upon returning from a recent vacation, I saw that the lead article in the current Chronicle of Philanthropy addresses issues of staffing, retention, and compensation in the non-profit sector. This posting, partially revised, from 7 July 2019 speaks to some of those issues and includes a few practical suggestions not mentioned in the Chronicle article. I hope these will be welcome additions to an important discourse. We funders must recognize the essential nature of quality staffing to accomplish the extraordinarily important work we enable. I particularly call your attention to sections #3, 4, 5, and 7.
A colleague recently expressed surprise that I had not submitted a response to an RFP for leadership training for a foundation board that was posted prominently by a national philanthropy organization. I demurred saying that I really am not an expert on “leadership.” The colleague’s response was pretty strong: “Are you kidding? Of course, you are” and went on to remind me of my own career path.
My professional world over the last quarter century has been fully in the area of grantmaking, funder education, and advising funders and families about how to make informed, ethical, and wise decisions. But the colleague reminded me that I have a long history of volunteer leadership roles, and professional work advising and teaching foundation leadership around the world, and, also have held senior executive and supervisory roles. I acknowledged that I had both relevant experience and some well-developed thoughts about leadership.
For what it is worth, I calculated that, over the course of my career, I have served on at least 60 boards and chaired 12. [It is a role I relish and would be delighted to join additional foundation boards.] Moreover, when I was an executive, I supervised many dozens of professionals and organizations around the world. While I am in the autumn of my career and these roles have been reduced, there are some learnings that have emerged along the way – a few of which may be worth sharing here.
1. I learned early on that there are 2 types of leadership – “ascribed” and “earned.” The former emerges out of “position” – and is often top down; the latter is what others attribute to you independent of the formal “position.” One would like to think that one can hold both roles simultaneously, but it doesn’t automatically follow and isn’t easy.
2. Being CEO or a professional supervisor carries a certain authority. Indeed, one has that ascribed position because there is assumed confidence that one can lead a business, organization, or foundation or some part of one. When one does this well, the staff, board, other stakeholders, and peers all respect the culture, style, and vision of the leader. This confidence must be earned. Without it, a leader has power but only ambivalent or reluctant followers or employees.
3. The empowerment and enfranchisement of others is typically the most effective long-term way to earn that respect. Top-down exercise of power or charismatic style may work for a while, but it rarely inspires genuine long-term loyalty or deep-seated respect. And they certainly do not cultivate future leadership and decision making, indispensable attributes for the long-term viability of any business or organization. [If you see me, ask me about my sobering discovery, very early in my career, about the flaws of charismatic leadership.]
4. The courage to stand for values in the face of organizational challenges is often a measure of how deeply a leader is committed to earning that role. Organizational change matters, and is always disruptive, but when those changes are only because it may be popular or because a few more powerful folks demand it, it may be expeditious but rarely efficacious. [A personal note: Much to my real surprise, in recent months several people told me that what they remember most about my various leadership roles – both as a professional and as a volunteer leader – were the times I stood fast on principle, or told “truth to power” – even when it was unpopular or at professionally cost/risk. Those anecdotes have touched me deeply.]
In this context, perhaps it is important to give an illustration: When I became CEO of a regional non-profit based in Chicago in 1982, I learned that not only was my salary low by any comparative local and national standard, but every single staff person’s salary was way below their comparable standards – and those standards themselves were barely manageable. The board thought that they were paying normal salaries. When I demonstrated the discrepancies, they offered to immediately bring my salary up to national norms. I asked if everyone’s salary would be raised and they said no. I refused to accept my increase until the entire staff received an appropriate increase. It took a full year, but it happened. I wonder what kind of leadership credibility I would have had if I had been the only beneficiary of a much-deserved salary correction!!!!
I also insisted that the increase was not to be a one-time bonus but rather an adjustment to everyone’s base salary. Otherwise annual incremental increases would be calculated on a much lower base.
5. If having a moral compass matters a lot, leadership also requires a profound empathy. That empathy needs to be manifest to those whom one leads. In these days of attention to staff retention and cultivation, perhaps two very concrete examples [of many techniques I used] will illustrate:
a. Career Pathing: When I was a CEO or supervisory executive, I offered to meet with every professional every year to help update their resumes. Why? Well, for one, virtually every professional thinks about his/her next career step; I know I did. Why should I begrudge that ambition in others? No, I didn’t want those colleagues to leave but even more I didn’t want them sneaking around thinking they were disloyal. An unintended consequence was that I often learned that many professionals were 80-90% satisfied but one element of their job was really bothering them. By switching that one assignment with another professional with a different set of priorities, both could be more gratified in their work, and remain longer than they originally intended.
b. Professional Development: In the non-profit sphere, personnel is almost always the largest budget line. So, if there are budget pressures, that is the first place to turn. One line that always seemed vulnerable was the one for professional development. Yet I knew that it was invaluable to the long-term strength of any organization as well as to the growth of individuals within it. Therefore, working with board leadership, we moved that item from being a separate budget line to an assured personnel benefit – in the same category as health benefits. It demonstrated our commitment to how important this was and protected it from budget cutters who saw conferences and staff training as a dispensable luxury item.
6. Effective leadership requires another balancing act as well: keeping an eye on the long term while understanding the daily demands on all elements of one’s organization or business. A visionary who only sees the future may appear charismatic but can often undercut those who need to do the work. One who is only committed to the daily organizational needs may be an outstanding Operating Officer, but rarely can lead the organization into the vagaries and potentialities of the future. This combination of skills and attributes is rarely easy, but, when achieved, it is the mark of outstanding and exemplary leadership.
7. Culture is the grout that holds the organizational edifice together. For example, espousing empowerment and then overruling decisions is likely to inspire only safe behaviors and discourage risk taking. Bragging about staff quality and then always hiring from outside for key positions erodes loyalty and casts doubt on your sincerity. Endorsing the need for equity yet continuing to pay differential salaries to women or minorities is suspect at best. When there is a discrepancy in any of these areas, there is an erosion of “earned” leadership that not only weakens the leader but takes a toll on the business or organization as well.
It is trite to say that leadership is both an art and a science. Typically, it is hard not because of our intentions but because of our blind spots – every single one of us has them.
As we look around the world today, we find a resurgence of a destructive, non-empathetic, self-satisfying leadership, and not only here in the USA. Whether because of blind spots or megalomania, they are the wrong kinds of leaders for long term societal thriving, and a counterproductive paradigm of good leadership. Someday, soon I hope, they will be replaced.
In the meantime, whether on the national, local, or organizational level, leadership informed by these insights learned over 5 decades may help advise the next generations of leaders in every sector.
September 11th, 2019
It was 3 years ago when a group of funders and advocacy groups announced the Participatory Grantmaking Initiative. It was founded on a key underlying philanthro-ethical principle – now cleverly articulated in the pithy statement: “Nothing about us without us.”
The initiative reminded funders that our power can distort our perceptions of what real needs are and our judgment about allocation of our funds. Underneath our careful diligence we are susceptible to the very same predispositions and biases as anyone else. If those most directly impacted, or at least those responsible for implementing our initiatives, are not involved in the decisions, how can we be sure that we are acting responsibly or equitably?
As our field has finally recognized, our race and ethnicity [and to a slightly lesser extent, our gender] does not always reflect those we are serving or funding. [By coincidence, this was written but not published before a recent Chronicle of Philanthropy article underscoring this point.] And, unless we are funding elite schools and museums, it is certainly true that our economic status is far removed from the at-risk or at-need populations we aim to serve. It is surely a no-brainer that there are perspectives that need to be in the room and a long overdue corrective to the all too pervasive top down process.
But whose room, what roles, which decisions are far from clear. Should or must decision making extend to the board room? Do potential grantees have a disqualifying conflict of interest if they are also decision makers? [Recusal is an obvious technical answer, but we know that if one is a decision maker, even if one doesn’t vote, her/his presence is there.] And, bottom line, empowerment aside, how do we know that who is in the room actually guarantees greater impact? Therein lies the challenge.
These are difficult questions to ask these days for several reasons:
1. At a time when all questions, yes even in our field, are viewed as political, even asking this question runs the risk of implying that I am opposed to “participatory grantmaking.” So, let me set my record straight: I have been on boards which used variations of this form of grantmaking for a long time – long before the phrase became popular. Unquestionably we did better grantmaking because of having on the ground experts in the room. No question. Moreover, as a philanthro-ethicist, I suspect that several thousand funders who have taken courses or workshops with me can attest that I have been a long-time advocate that there need to be many means of countering the power imbalances intrinsic to our field – sharing decision-making is only one.
2. A more practical challenge is determining which stakeholders should be invited into the room. We have learned from program evaluators that determining which stakeholders need to be heard is often the most challenging part of any evaluation process. If that is hard for professional evaluators, consider the challenge to foundations and other funders who want to do the right thing and include the best informants but have limited resources and time to do that research. How do they avoid the challenges that they may have cherry picked their favorites or overlooked an important group?
3. A more far reaching question is what impact matters. Often in the most intractable systemic issues, funders can have perspectives that local service deliverers cannot have. That doesn’t mean that the service deliverers are wrong – but many of them have demanding claims on their time and resources that don’t allow or justify long term thinking. How one balances those two competing claims is not easy, and the impact measures themselves may compete. At the very least, it should force us to determine which interventions are most in line with our competencies and goals, and at the same time encourage us to help think through how the other needs can best be met.
For example, there is no systemic or societal issue that can be solved by a single intervention or funding approach. There are urgent needs for immediate responses to those who are ill or homeless or hungry or displaced. At the same time, all of those require a responsive public policy that helps ameliorate the underlying issues that a short-term intervention cannot. Funders with a commitment to address systemic issues know that advocacy and inter-sector collaborations are indispensable. It is perfectly reasonable to choose which approach is best for any individual funder, but we are not exempt for doing so with an alignment with those who are addressing the needs we cannot.
Impact measures – and which stakeholders should participate in these decisions – depend very much on where one fits on the continuum.
4. Underneath all of this is the question of the larger role of independent voluntary philanthropy in an open society. If, as many argue with a good deal of historic legitimacy, it is to fill in the gaping gaps that government chooses not to fund, then there is no question that there should be a mandate to engage as many stakeholders as possible in decision making. But if, as many others have argued, private philanthropy is society’s risk capital, not subject to plebiscite or opinion polls, then one might argue that it needs to be as free as possible to take those risks and stakeholders should be informants but not have a veto on funding choices. Of course, those decisions should be done in responsible, ethical, informed, and humble ways, but to take those risks is precisely the unique role that no other institution can play.
To return to the key point: our field, created out of privilege, has a lot to answer for. Whether intentionally or not, we have a long history of not treating our potential grantees as we should and knowing how to understand real needs and equity in making our decisions. Participatory Grantmaking is surely one of the correctives we should make to is to bring stakeholders into the funding process. As we see, even with the best of intentions, that approach is often easier articulated than implemented.
September 2nd, 2019
This post from 2009 still seems to ring true despite all of the attention given to best family foundation practice over the last 10 years.
In my work with family foundations, there are few matters that arise as frequently as the questions of succession. “Who”, “when”, and “if” come up all the time. Sometimes raised by the founder, more often raised by next generations, the all too frequent absence of clarity can be an open or barely hidden source of contention, resentment, and puzzlement which often gets in the way of good and open decision making, and as often taints the well-deserved family legacy of giving.
In the current philanthropy environment, it is crucial to return to core matters such as this. All too often, in the face of books and press which challenge the larger conceptual issues of philanthropy, especially given the economic and political crunch of these times, people are reluctant to raise questions like this. They may feel that their energies should be spent making sure that their philanthropy is effective, or high impact, or transformative, or cutting edge. All of that is valid, but if there is internal disarray or disappointment, it will be hard to get to those other issues in a way that is reinforcing to the family.
No single article can address all of this in depth but from my experience there are a number of issues and bits of advice which can prove helpful.
August 28th, 2019
This post is another that is worth revisiting several years since its first publication. I have made some very modest revisions to account for changes in what I am doing where, but otherwise it is intact. Your thoughts are welcome.
A few weeks ago, a philanthropist friend forwarded an op-ed regarding ethics for funders. [I like to give credit where credit is due, but the source of the op-ed wasn’t included.]
In reading it, I found myself amused – not because the author was off base, but because it was so clearly written by a fundraising expert who was expressing some exasperation with the overreach of some funders. It is quite true that there are ethical limits to what a funder and grantmaker can request and require from a grantee, and it is useful for funders to hear how they are perceived by the other side of the table. But in many ways, the author’s points are too easy and in other other ways do not go deep enough into the ethical and best practice issues between funders and grantees.
I have been teaching funders since 2000, for many years at NYU’s Academy for Funder Education, now at UPenn’s Center for High Impact Philanthropy, and through our own Institute for Wise Philanthropy. In those courses, we spend a great deal of time unpacking this very complex area. This has also been a key topic of interest in several recent conferences of foundations and grantmakers. Here are 10 key points to help funders stay on the right side of right:
1. Power Imbalance Most funders do not willfully or purposely abuse the role of funder although, to be sure, some do and some do egregiously. Most however are simply unaware of the appropriate boundaries and cross them innocently. Most of these transgressions occur because of an insufficient awareness of the implicit power imbalance and the concomitant and enthusiastic willingness of a potential grantee to do whatever possible to encourage a gift or grant.
2. Philanthropy Law Most funders know the basics of philanthropy law but are less clear on their ramifications in their daily application. For but one example, “self dealing”, always illegal, is not the same as “conflict of interest” which is more nuanced and subject to board-determined policy.
3. Law vs Ethics What is legal is not always the most ethical. For example, the law permits a foundation to pay an attorney or investment manager who sits on its board. Many of us in the field feel that this creates ethical dilemmas for a board’s decision-making autonomy. I for one feel strongly that best practice should be to separate those roles – either one sits on the board or is a compensated professional but not both at the same time. This matter has little to do with funder-grantee relations but a great deal about internal foundation decision-making.
4. Interlocking Boards One area about which there is conflicting consensus is the propriety of a foundation staff or board member sitting on the board of a grantee or vice-versa. We have developed some guidelines to help foundations figure out what makes sense for them. Suffice it to say that there should be a clear alignment between grantmaking process and the policy regarding interlocking boards.
5. Honoring Commitments.. Sad to say, too many funders don’t fully grasp that public benefit organizations rely on receiving their grants on the dates promised. They pay staff, rent space, run programs anticipating that income. A grant letter should be viewed as binding on both the grantee and funder. This problem is more typically evident among unstaffed or outsourced foundations, but it should never be. It is a commitment and it is an ethical lapse not to pay on time.
6. Transparency of Procedure. Many of us have written about what transparency might mean in the contemporary grantmaking world; it has become the subject of much debate. One thing which should not be subject to debate is the expectation that a funding organization makes its procedures known and clear. That process can range from stating that no unsolicited proposals will be accepted, or that there are very specific conditions for consideration or anything in between. An organization searching for funding should be able to ascertain in a clear way who is eligible, what information will be required and when, when they can expect to be notified of decisions, etc. There are no ethical mandates that any one way of doing these things is superior to another, but there are very clear ones that processes should be consistent and evident.
There are numerous other important ethics and best practice issues which every funder should address, and in many cases establish foundation policies. But since the issue of funder – grantee relations is the one which precipitated this post and garners the most attention, let’s turn to some of the sticky issues:
7. Funding for Success. The challenge for a funder is to give the most effective amount toward a project or organization to provide the greatest likelihood that the project will succeed – or at least come close to their expectations. One way NOT to do that is to automatically discount any request. Doing so may save a funder money in the short run but may well guarantee mediocrity in the long run. Now, to be fair to funders, non-profits have been known to pad budgets and a funder often has to work hard to figure out what is really necessary or appropriate. But the key to setting the right amount is to be comfortable that the amount given will make the likelihood of success greater. It is also true that inexperienced organizations may ask for too little – or in their naivete don’t realize what will really be necessary. Such miscalculation from a large university or museum is inexcusable; from a small neighborhood center or start-up may be understandable. This organization may well be understaffed and each of the staff has multiple responsibilities. If one thinks their idea or project is worthy, no reason to punish their insufficient training. Help them know what they understated or omitted. While on the surface this may not appear to be an ethical issue, it veers into it if a funder’s funding pattern makes failure or mediocrity likely. It also underscores the need for those who solicit funds to not play games with exaggerated claims and padded budgeting.
8 Staff and Benefits. Another area where funders, mostly innocently, tend to compound a the challenges for non profit success is to have conflicting expectations. How often do we hear funders bemoan the inability of the sector to retain the best and brightest while at the same time putting pressure on hard pressed groups to cut their budgets? If, say, 80% of a budget is staff, what ends up being cut is salary, fringes, or f.t.e.’s. Funders should hold their grantees to standards of personnel practices which they would expect of a quality run organization, and fund accordingly. [While much has been written about overpayment of a few executives in this sector, in fact the issue of underpayment is far more common.]
9.Leading Them On -or, the Walking $ Sign. Site visits are wonderful ways for a funder to learn about an organization. Yet nothing raises the anticipation level higher than the word that “a funder is coming: a funder is coming”. Organizational execs send memos to their staff to the effect: “clean up your room and dress up”. A site visit makes all the sense in the world if there are really open questions about a grant request or as a way to monitor one already given which can be answered best by seeing for oneself. By all means. But funders need to be aware that when they walk into a room they are not simply flies on the wall, but rather the center of attention. People stop what they are doing, or adjust their activities for your benefit. [I could tell so many stories here, but I imagine that any experienced funder has his or her own litany.] If there is no real decision-making or monitoring, or, especially, if you have no real interest in funding a particular place or project, look for less intrusive ways to satisfy your philanthropic curiosity. Your very presence will lead a non-profit into the assumption that you are open to a proposal or have made a decision to fund them.
10. Expectations and Relationship After the Grant is Given. In my experience, this is the area most fraught with potential frustration. Funders should clarify, when a grant is given, what they expect. Whether this has to do with monitoring or evaluation or recognition or any of a long list of other relationship areas, funders have an obligation to not leave a grantee guessing. This will allow a recipient to give you what you want to know – or to determine if you are overreaching. [To take an extreme example, a $10,000 gift to a major university is not going to get a named chair; the same gift to a food pantry may be the largest gift in its history. The responses and expectations should be quite different. Similarly, it is important for funders to set expectations which are proportional to the size of the gift and the abilities of an organization to respond. A hospital or university or major museum should have no problem producing reports in a timely manner; there should be more reduced expectations from a small 2 or 3 person start-up.
This list in no way defines all of the ethical and best practice issues for funders. It is not even the full list of what we cover in working with and teaching funders, and, indeed, in the years since this was first written, the complex issue of equity and inclusion have moved to the center of our discourse. In a subsequent postings, I have explored the charged area of intervention by a funder into the work, mission, or priorities of a grantee. Until then, I invite you to add your topics to this list and to make this a robust discussion so that we can enhance the quality and standards of those who are entrusted with funds to make the world better.