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Posts from the ‘Foundation Practice’ Category

#368 Funding Arts and Culture During COVID-19

March 31st, 2020

Richard Marker

Addendum: Not so surprisingly, just hours after this was first published, I began reading of webinars addressing the particular challenges facing arts and culture institutions. More to the point, I also saw certain politicians staking out the position that it is inappropriate for bail-out government funds to be available to this sub-sector. Hopefully this post will help articulate some of the dialectic regarding this realm.

In this post, I return to philanthropy-practitioner questions and practices – this time for those who fund in the Arts and Culture realm. As of this writing, I have not yet seen any larger discussion of this issue, although I anticipate that we will in the coming days and weeks. I welcome thoughts and reactions.

The question has been raised if it is legitimate or even ethical to continue funding in this area in the face of the overwhelming human urgency of COVID-19. COVID-19 is about life and death; arts and culture are about quality of life. What is a funder to think given that stark a comparison?

Similar questions have been raised in the past – during recessions, natural disasters, human caused disasters. “Compassion funding” – the very human and humane responses that we all feel at these times seems to weigh heavily toward an argument for a suspension of “quality of life” causes when so many are struggling with basic needs. Let’s get these people healthy or back on their feet and then we can get back to these “extras”.

That argument, though, is rebuttable. Even if one believes that the urgency of the moment outweighs the long term, it may be a short-sighted decision to discontinue all funding to this sub-sector. At the end of this thing, whenever it will be, we will need to re-engage and rebuild those organizations that add to the nature of what it means to be human, or perhaps better said: art and culture are not “additions” but essential.. Are we better off with shuttered centers and bankrupt organizations that would need to be created anew?

If history is any indication, the answer is that we should do what we can to sustain this sector, in some way, since gearing back up is much easier than starting back up.

The next question is: which ones? Is it more important to guarantee that the largest, wealthiest, most prestigious ones are kept whole since they serve the largest portion of the population on a regular basis? Or conversely, can we assume that those are also the organizations that do and will receive money from the deepest pocketed donors, governments, and endowments, so we should focus on the smaller entities that perennially exist on a more fragile financial base?

Part of the answer has to do with one’s funding style and priorities. For a “place-based” funder – that is, a funder whose giving priorities are primarily connected to a particular city or region, sustaining local institutions with which they have had meaningful relationships over time may be the most appropriate and compelling approach. One’s funding at this time may not be sufficient to keep the organization whole, but it may be enough to keep it alive. That support should involve cash, of course, but it may also include contracting for expertise in helping all regional nonprofits during times of enforced transition. A singe consultant may well serve to advise an entire cadre of at-risk institutions.

We know from past crises that there will be both consolidations and fall out. And there will be time for that down the road. But forcing those kinds of hard and strategic choices in a time of crisis is exactly the wrong time to force existential decisions. That is especially true in this particular time of COVID-19 when no one can know what kinds of earned revenue will be possible or when physical spaces will be open again. And no one can fully know what kind of economic downturn has begun.

The issue is more complex for the larger legacy institutions. Most of us were aghast to read that the Washington based NSO laid off its entire orchestra the same day it received a guarantee of an infusion from bailout funds. It creates a conceptual dilemma for funders: If we believe that those legacy institutions are national treasures that deserve taxpayer support, then we might argue that private philanthropy should be reserved for those institutions that don’t receive that support. But here, even with taxpayer funding, the leadership acted in what appear to be self-destructive ways, or at least, with severe myopia. Whatever the correct longer-term answer, it is certainly true that modest pocketed funders will not be able to make up the difference for those large legacy institutions. Better to leave their philanthropy to places where their funding will make a/the difference.

It has become fairly much the norm in the last two weeks for funders to agree to remove restrictions from existing funding, simplify their application and decision processes, speed up their payment of grants, and dig deeper into reserves. All of this applies to arts and culture funding as well – but with one additional caveat: funding should be built around the commitment by the recipient boards to keep their organizations alive – even if not whole -until, as we suggest above, the time is right to take the hard look at what we need to do to keep a robust arts and culture community functioning well into the future.

There will be very, very hard decisions ahead about which groups and institutions survive, consolidate, merge, or, sadly, close. But the option should never be to surrender our commitment to the quality of human experience as provided by the “arts and culture” sector. History has taught us no less.

#365 We’ve Been Here Before – Lessons from Past Challenges to the Philanthropy Field in the Time of COVID-19

March 18th, 2020

Richard Marker

“Everything that can be said has been said, but not everyone has said it.” This expression has been variously attributed to Winston Churchill, Abba Eban, and who knows who else.

As I have written and re-written this post over the last week, I have tried hard to avoid saying what so many of my colleagues in the philanthropy space have been saying. I do want to humbly express my admiration to our field for stepping up so quickly, thoughtfully, and, yes, even eloquently. The assertive actions and ambitious outreach I have observed demonstrates that our field is acting in assertive and proactive ways rarely seen in past crises.

Therefore, rather than reiterating those recommendations, these few comments are intended to underscore or articulate a few thoughts that seem understated by many. They are informed by what we have seen and learned from past crises – some caused by human behaviors and misbehavior, and some caused by acts of nature.

Among those lessons:

1. Our field has both short term and long-term capabilities.

a. If there has been one consistent message from this field, it is this: In the short term, our grantees face short falls, diminished contributions, and, depending on the grantee, increased demands for services. Since the US government and even many States have shown themselves to be pokey payers, many direct service agencies face the dilemma of long time wait for reimbursements. Contributions will be diminished and delayed. This is not the time for our grantmaking to be clever; it is the time for us to be flexible. To reiterate, I want to applaud our sector in affirming this point in so many ways.

b. Less stated but very important: We have also learned that we need to keep at least some of our powder dry. There are unanticipated demands, organizational re-alignments, and systemic dislocations that deserve attention – long after the crisis, whatever crisis, has passed from the headlines.

2. Our field needs to underscore our flexibility and agility in our spending policies.

We have just emerged from 11 years of a bull market. Any foundation or private funder would have had to be remarkably counter-trend to have earned only 5% each year over these years. In past economic downturns, some foundations adjusted their “base” corpus to a prior date or number so that there would greater ability to respond to genuine challenges faced by their grantees. This may be one of those time. For US based foundations, the recent change in the excise tax calculation makes this kind of spending adjustment much easier.

3. Our field needs to use all the arrows in our quiver.

a. If organizations are struggling with cash flow for reasons beyond their control, a revolving loan fund may prove useful. For US foundations, this would qualify as a PRI and can be a very effective support vehicle.

b. If the fields we are funding are suffering because of short-sighted public policy, advocacy can/must be a powerful tool to get the attention of policy makers. We know that the entire philanthropy capacity can never solve major systemic challenges alone, especially of the sort we are now facing, we can only accomplish what we are committed to with a concerted affirmation of the need for responsive and responsible public policy.

c. Our field has made great strides over the last few years in learning how to collaborate with each other, and with those who are directly responsible for implementation – sometimes called grantees or partners. The current reality – with both extreme economic dislocation and profound human vulnerability – calls for us to continue to model this welcome change in our behavior.

d. All of this is happening at a time when civil society has been at risk in the USA and elsewhere in the world. [The subject of a longer and more in-depth conversation, to be sure.] We must accept a mandate to become a stabilizing force at a very fragile moment in history.

This list is not intended to be complete nor to replace the extraordinary advice offered by so many, especially about how we work with grantees. It is simply an attempt to emphasize a very few of those recommendations that may not have been as widely articulated as some others.

The current challenges are not short term. Recessions, even those that are short lived, have always had severe implications for the most vulnerable. Add to that the recognition of how universal our human vulnerability is. Our work is only just beginning, and we will be called upon to rely on our depths of empathy and test the range of our sector’s capacity to continue to provide a source of support. We must.

#330 Alignment-Staffing: Who Should Do All This Stuff?

January 22nd, 2019

Richard Marker

This post is the third of a series on “Alignment” for funders – aligning our values, our staffing, our funding, and our intentions. Clients and those who have participated in our educational offerings are well aware of this thinking, but I have not previously published these practica. Please see #326 and #328 as the other installments to date. Others may follow in due course.

The series focuses on necessary preconditions for the successful implementation of a funding strategy. It assumes that readers already have chosen what kind of structure within which they are making these decisions – e.g., a private foundation or a DAF or an LLC, et al. For those readers who are still deciding among those options or when to use which, please feel to be in touch directly since those choices are beyond the scope of this series.

It was a brand-new foundation coming into existence as part of an estate. The funder had no direct heirs and even the relatives he named to the new board did not live near the locale of the foundation. This was the first meeting of the new foundation board and they wanted to do it right. We had worked our way through all of the strategy processes with few stumbles, and general consensus on almost everything. It was time to put it all together. One of the board members tried to summarize: “we want to make a lot of grants in these areas and we don’t want to spend our money on staff and other overhead.”

When I asked who, then, will do all the work of soliciting and reviewing all of those many grants, preparing material for the board meeting docket, maintaining connection with grantees, and all the rest, they were stumped. The board members were geographically dispersed and professionally diverse. Their desires were inherently contradictory. In order to implement everything else they had worked so hard on would require rethinking their seemingly diametrically opposed preferences on how to manage their grantmaking process.

Many readers, I know, are members of Exponent Philanthropy, perhaps the largest affinity group of funders. For many years, it was known as the Association of Small Foundations. As far as I know it is the only organization that defines its target market by the number of staff. “Small” is not the size of the asset base but by the size of the staffing – from 0 to 3 or 4. There are members with assets of over $B and those with a corpus a small fraction of that – but in each case they have chosen to do their work without a large staffed infrastructure. [full disclosure: we are members and have had a connection with this organization for many years.]

In recent years, there has been a surge of new foundations of a substantial size. I have been asked if there is a formula to determine how many staff they should plan on. It is a good question, but one that doesn’t lend itself to a simple formula.

In fact, this stage of alignment is determining who will do all of the work of being an effective funder. And while it may appear easier for funders and foundations with deeper pockets, they too must make careful determinations. What we will see in the choices below is that it is not a matter of how much money one has that determines what the staffing needs are, but rather how one best manages the philanthropic dollars at one’s disposal consistent with one’s philanthropic aspirations.

Below are a range of options – and the underlying arguments when each makes the most sense. Some of these are more tax advantaged than others, at least in the short run, but every study has shown that tax favorability is not [and should not be] the primary motivator in the decision, and too much reliance on tax avoidance may lead to unsatisfactory philanthropy..

A. The Dining Table Model: Yes, there are indeed circumstances when the old-fashioned dining table model makes the most sense. When the numbers of stakeholders or decision makers is small, when control matters, when the cost and bureaucracy of other models seems superfluous and intrusive, the most reasonable way to proceed may be to keep things intimate and unstructured. Intimate and unstructured need not mean that there is no strategy, only that the principals prefer the immediacy of keeping things close at hand and as non-bureaucratic as possible.
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A variation on this is the growing popularity of Giving Circles [a very old model now seeing a resurgence] – where groups of folks put money into a pot and make joint decisions. In most cases, these are self-directed and unstaffed.

B. Outsourcing:

1. The Outsourced Back Office Model: For many, the real motivation of being funders is doing the funding. Relating to potential and actual grantees, thinking through an appropriate involvement strategy, struggling with the hard decisions of yes and no are both the privilege and reason for engagement.

But nothing could be a greater turn off for these folks than having to push all those papers – tax forms, check writing, record keeping, COI files… they all have to be done but why not let someone else do it. Many outsourcing firms have real expertise in this area so they can relieve the burden for funders to do what they want to do.

This model can even apply when there are program officers and other professional staff. [see C.2. below.] Some foundations simply want to devote all of their energies to the actual grantmaking side of grantmaking.

2. The Outsourced Grantmaking Model: Some of you may raise your eyebrows in surprise at this one. But in fact, there are some funders who accept the responsibility of allocating money under their auspices but find actual involvement in doing so to be uninteresting.

This model works best when other internal structures can handle the administration It might be a family office or a corporate related foundation. In those cases, there are likely to be lawyers, accountants, bookkeepers, and office managers who can handle everything except the grantmaking. An outside group or a philanthropy advisor can then handle all of the grantmaking due diligence and prepare board books for the times when decisions must be made. Funders are free to make the decisions, but they are not sufficiently committed to or excited by their obligation to want to spend extra time on it.

3. Outsourcing Both: Some folks would like to outsource both the grantmaking and the back-office work and only participate in the final decision making. There are many reasons why: the foundation or funders’ priorities may have a very circumscribed mandate. Or perhaps there is a funding vehicle that will only be capitalized as part of an estate or another liquidity event so the grantmaking process is really quite minimal. For funders who are willing to surrender control but still participate in decision making, Donor Advised Funds are an example of an all-in-one solution. As the data shows, they are proving quite popular since DAF’s have grown exponentially over the last few years.

For those who wish to maintain more control or at least maintain that option into the future, there are other ways of accomplishing a full outsourcing approach when one wishes to maintain more control. Some consulting firms offer these same services to individual donors or private foundations – providing full service outsourcing to the degree a funder wishes to avail him or herself of them.

C. Employing staff: While outsourcing has advantages for many, especially at early stages, having one own’s staff to help implement a funding strategy often becomes a logical option. After all, it means that the staff is working for you, and can respond to your needs at your pace and in ways that serve your needs. There are three stages of “in—housing”:

1. Support staff: As in “B”above, many funders find the experience with grantees and in community initiatives to be the gratifying part of this work. What they don’t find gratifying is the process of getting there. Having support staff who can organize all of the paper work – from proposal sorting to check writing to appointment scheduling – relives them of that part of the work, necessary though it is. Because this staff [person or people] is/are hired directly and accountable only to the funders, the range of activity and responsibility can be adapted and adjusted as necessary. At the same time, funders can be focused on where they much prefer to be, being funders..

2. Program staff: One level up is hiring professionals to be more directly involved in grantmaking practice. There are a number of reasons for doing so: it allows a professional to run interference with those who want funders’ support; it allows for more intensive due diligence and professional level pre-screening; it expands the reach of the funders by having someone able to represent them in a broader range of communal activities; and, if the program staff brings a professional expertise, it allows a more sophisticated understanding of the funders’ fields of interests.

A key decision at this juncture is what core competence is most relevant. Should one hire a generalist who has knowledge of or experience with the philanthropy field or should one choose a subject matter expert in your field or fields of funding. For large and very large foundations [see below], one might do both, but for smaller staffed grantmakers, there probably are not resources to have both a content specialist and a generalist.

A functional rule of thumb in thinking this through is how specialized and focused one’s grantmaking. If one’s funding is place based, and includes a wide variety of fields, a generalist may be much better able to coordinate whatever is necessary [and even to subcontract analysis or evaluation]. However, if one’s funding is very specialized or field based, content specialists may be a better choice.

The number of program and grants management staff will depend very much on two key variables: how open and competitive the funders’ processes are and how involved the funder wishes the staff to be with the fields of interest and their grantees. A funder who makes a very limited number of grants to a predetermined group of grantees needs fewer program staff than one whose style and approach is to have deep involvement with grantees, and work across a variety of fields of interest.

Let us underscore that, in this option, the principal and/or trustees are making the executive choices and the program staff, however large, is providing the most informed choices for them. However, as the staffing and complexity level grow, many funders will choose to move to the next stage. NB: as will be reiterated below, this is not a question of how large the asset base, but the preferred role of the trustees and principals. There are many quite large foundations – especially family directed, that, titles notwithstanding, choose this as their preferred model.

3. Executive Directed: When a funding entity gets to certain level of complexity, and there are numerous staff to supervise, many funders will choose to hire a professional to provide executive direction. There are a variety of models [beyond the scope of this piece] about whether an ED is preferable to a President/CEO, whether the CEO should or should not be a voting member of the board, and how much authority should be delegated.

A crucial condition for success of this model is that, whatever title that chief professional has, he or she should be the primary liaison to the Trustees and be the person who provides staff direction for other staff members..

When a funding entity chooses to move to an executive led level, its board and the principals need to accept new disciplines in the effective management of their funding. If they continue to prefer to “micromanage” or oversee the staff themselves, they would do better to revert to some variation of “2.” As suggested above, this is NOT a question of how much money or how many staff, but rather the role the funders choose to have.

No matter which model a funder chooses, a number of key questions need to be answered. In looking back at the options discussed above, answering these questions may help direct funders toward a clear preference for one or another of the above models..

1. Who will make the key decisions?
2. Who will gather the relevant information to make those decisions?
3. Who will keep financial records?
4. Who will keep program records?
5. Who will keep board records?
6. Who will make sure that bills are paid – including timely payment of grants?
7. Who will prepare and file the tax returns?
8. Who will manage the assets?
9. Who will maintain or manage the relationships with grantees?
10. If any or all of the functions are outsourced, who will manage those relationships and oversee those functions?
11. If there are staff, who will hire, supervise, and coordinate the staff and staff functions?
12. Who will communicate with and convene the trustees?
13. How will you know if the model you are now using has become too burdensome, not adequate, in need of revision, or other change? [Hint – it is probably worth looking at every 3-5 years.]

This article does not attempt to recommend a particular approach or formula to decide what should work for everyone -even if your goals and asset base is the same as another funder or foundation. Rather it is to give a framework for making sure that it all gets done, and in a way that aligns with the styles and preferences raised in the prior articles on alignment.

When that happens, grantmakers are far more likely to find the process of being funders gratifying and they will have the greatest desired impact with the resources at our disposal.

#331 Publicizing Client Names: Responses from the Field

January 14th, 2019

Richard Marker

A couple of weeks ago, in post #329, I asked readers to respond to a professional query: Whether to publicize or not to publicize the names of clients.

The question I posed was whether my 2-decade plus practice of NOT putting the names of ANY clients in writing was an unnecessary and counterproductive stringency, or an optimum best practice. Any cursory glance at the publications and websites of others in the field of philanthropy advising shows a wide variation on how clients are described and listed, so it is a relevant question for me, especially as we are in the midst of rethinking our own marketing approach.

The responses fell into 2 categories:

Response 1: A narrow majority advocated public listing of clients: They argue that potential clients want to be able to see at a glance what one’s experience has been, how widely used one is, and whether one’s client base is similar to their situation. Many respondents argued that potential clients take for granted that any professional advisor will respect a desire for discretion and confidentiality so that concern should not be a sufficient reason to choose to list none.

Response 2: A smaller group took note of the particular kind of advisory work that I do. They felt that, since I don’t manage anyone’s giving, foundation, or grantmaking, but rather only deal with underlying strategy issues, in my particular case, discretion is the better part of valor. Individuals, families, or foundation boards may not want the world to know that they sought outside counsel for their presenting issue, and by going public, it could put me in the position of having to clarify to those who inquire what the nature of the work was. Better, they felt, to err on the side of sharing relevant referrals only when appropriate. Several posited that credibility is not really a relevant factor since most of us get our business by personal recommendations anyway and not through random pursuit of competitive websites. [Is that true?]

One respondent raised a particularly interesting ethical observation: If we in our field talk about the importance of transparency, shouldn’t that extend to how we present ourselves? I wasn’t persuaded that this is where the transparency rubber needs to hit the philanthropy road, but it did make me wonder if too much discretion might make some suspicious.

For now, I have decided to continue my past practice but to do something I haven’t done before: contact past clients to remind them that I work with a limited number of folks like them. Then it would be fully up to them to decide how public or private they choose to be.

To all who offered their opinion, thanks very much. Your thoughts were much appreciated.

#328 – Aligning Donor Intent with Donor Practice: Not as Easy as it Sounds.

January 10th, 2019

Richard Marker

This post is the second of a series on “Alignment” as funders – aligning our values, our staffing, our funding, and our intentions. Clients and those who have participated in our educational offerings are well aware of this thinking, but I have not previously published these practica. Please see #328 and #330 for the other installments.

The series focuses on three necessary preconditions for the successful implementation of a funding strategy. It assumes that readers already have chosen what kind of structure in which they are making these decisions – e.g., a private foundation or a DAF or an LLC, et al. For those readers who are still deciding among those options or when to use which, please feel to be in touch directly since those choices are beyond the scope of this series.

A. About a dozen years ago, I was approached by 2 third generation family members who were struggling with a dilemma. Their grandfather’s instructions were to use the foundation to support “conservation” but didn’t want any of it to go to “environmentalism.” Even if they understood the implicit political leanings in their instructions, how to implement this was proving a challenge. After all, any meaningful “conservation” funding was, of course, a form of commitment to the environment.

B. Many readers, I suspect, are familiar with another challenge of donor intent. A foundation was created “to keep the family together” – as if a lifetime of disfunction or rivalry can suddenly be eliminated because the family members are now forced to sit at the same funding table. Money may go out the proverbial door, but just having a philanthropic vehicle isn’t likely to solve unresolved family issues.

C. A similar dilemma is seen by this not uncommon scenario. The founder wanted the family to come together to make philanthropy decisions, but the organizational recipients or the geographic parameters are so tightly structured that the successor board members are all disenfranchised before they begin. What incentive do they have to participate?

D. Recently, a foundation affirmed that they did not want to support any “social justice” initiatives, when, in fact, they have a long and continuing practice of anti-poverty funding. What might that mean in practice – now and in the future?

E. And then there are those who choose to leave their intentions unstated, freeing subsequent trustees to struggle about what, if any, guidelines should apply. Should they extrapolate from the founders’ own priorities or practices? Is that liberating – endowing future generations with complete freedom – or a sign that the founder was reluctant to face his or her own mortality? What if the kinds of funding the founder chose to do are at odds with the preferences – for whatever reasons – of successor generations? Should they be free to start their thinking de novo, as if no precedent applies? And, finally, in the absence of stated expectations one way or another, is the default assumption that a foundation should exist in perpetuity?

Since the majority of funding entities, especially foundations and donor advised funds, are personal or family oriented, the matter of donor intent is not abstract. In families, every decision is personal and how family members choose to interpret or implement donor intent[ or its absence] can be read as a commentary on his or her relationship to the family, its values, its history, and its legacy. And commentaries can be affirming or judgmental, not always endearing, to others at the table.

An approach:

As we have shown in prior articles, in most cases, differences of opinions are not necessarily reflections of character flaws at all but may simply be differing but legitimate approaches to philanthropy. I have found that one helpful way to address this is to begin the process by identifying guidelines of what should always be off limits – that is, what should never be funded – because it would have been abhorrent to the founders or would violate their stated intent.

“Negative” guidelines are often easier to address than positive ones. The process can allow wholesale dismissal of entire categories, no matter the merit or type of grant requested. It even can make procedures more efficient especially with on-line guidelines or systems. Insofar as they help address our topic, families can usually agree on these guidelines more easily than those that are inclusive. At least in my professional advisory experience, it has often proved the easiest and quickest way to get at the discussion of what should be on the decision-making table where the real hard work begins.

Problem Solving:

To illustrate the way “alignment” works, let us revisit the 5 scenarios above to see what might make sense or be helpful in each case.

A. The third generation chose to apply a “conservative” approach to their approach to “conservation.” While they fully recognized that government action can be exponentially more protective, and therefore leverage a conservation commitment, they chose to restrict their funding to the localities and regions where the family lived, and where their decisions would be respected as personal commitments. Their reluctance to engage in advocacy or larger issues was a reluctance to challenge an implied intent, even if, they acknowledged, that mission might be addressed more effectively, and more in keeping with the values of the third generation’s values and priorities through advocacy.

B. There is no single or best practice answer to this one and I suspect that any of us in this field have helped resolve the challenge in a variety of ways. Sometimes, the foundation is large enough and its reach broad enough that the family can simply delegate the operation of the foundation to staff and perfunctorily go through the motions when required. Or perhaps, to set it up so that it is a single foundation in name only but functions as multiple entities under a single rubric. The Foundation continues, but no one is forced to make joint or mutual decisions.

In other occasions, even that may prove too uncomfortable, so the family may decide to close the foundation with a limited number of larger gifts honoring the founders or, perhaps, turn the corpus over to a Donor Advised Fund [see C below.]

C. When the founder/funder tries to “rule from the grave” it invariably backfires. Some in the second generation may feel a sense of obligation to their parents, but very few in subsequent generations will. They may live in different places, have different priorities, or merely not want to waste their time pretending to make decisions that are pre-determined. This is a case where a Donor Advised Fund may be an ideal solution – at lower cost they can manage and honor the founders’ restrictions, and still, nominally at least, keep the family in the loop. [This can work as a partial solution if only some of the institutional commitments are pre-determined. It means that the family or board can concentrate their energies and attentions on matters where their deliberations matter.]

D. When the words and actions diverge, it presents a real cultural challenge to funders. As in “A”, none of us in naïve about the political leanings of the founders, so what should subsequent trustees do – especially since poverty alleviation is always about addressing unfairness and social justice?

This is a case where “alignment” needs to rely on Stage 1 of the strategy process, understanding the implicit “cultures” of the foundation and those in the room. [A process alluded to in post #326 and developed more fully in numerous prior articles.] That process, if done well, has already clarified preferences regarding risk, recognition, involvement, and more. By articulating the how and why of this foundation’s poverty alleviation commitments, it can obviate the need to rely on politically loaded terms about which trustees may disagree.

E. Unarticulated intent is both the most liberating and puzzling at the same time. It happens quite frequently. Often, an attorney is more committed to creating an estate motivated vehicle than fully exploring the philanthropic needs of the family or even the client. [You would be amazed how frequently foundation Articles of Incorporation are little more than boiler plate documents reiterating basic foundation law with virtually no attention to motivation or function.]

In my experience, this has led to a variety of responses. In more cases than one might imagine, the 2nd generation did not even know a foundation existed before the founders died. To take but one example, after a difficult few years trying to make sense of it all, the responses of the third generation proved decisive: they didn’t care where the money went – only that it afforded them the opportunity to connect as an entire family on a regular basis. Once that happened, it obviated the tensions among the 2nd Gen siblings, and led to an affirmative raison d’etre of the foundation.

In another case, an unusually magnanimous founder explicitly articulated her reasons for not formulating messages to successors. She pointed out how the world had changed in her lifetime, her perspectives had evolved over her lifetime, and her understanding of the world was certainly not the same as when she was young. Certainly, future generations would be faced with a very different world and they needed the same autonomy to face their radically changing world. In my experience, there aren’t that many folks who think that way,

Most often, the absence of donor intent serves to handcuff the successor trustees as much as it liberates.. It means that everything is on the table including how committed they need to be interpreting what might have been intended but unsaid, how long to exist, how open-ended their process, how extensive their reach, how open to risk. At the end of the process, if done properly, the successors will have developed an integrated aligned funder approach that works for them and has the impact they desire. If not, it can lead to years of ungratifying grantmaking and having much less of an impact than the resources would allow.

It is worth doing properly.

#326 – Aligning Our Funding Strategy with Our Words and Intentions: The Case of “Equity”

January 7th, 2019

Richard Marker

This post is the first of a series on “Alignment” as funders – aligning our values, our staffing, our funding, and our intentions. Clients and those who have participated in our educational offerings are well aware of this thinking, but I have not previously published these practica. Please see #328 and #330 as the next installments.

The series focuses on three necessary preconditions for the successful implementation of a funding strategy. It assumes that readers already have chosen what kind of structure in which they are making these decisions – e.g., a private foundation or a DAF or an LLC, et al. For those readers who are still deciding among those options or when to use which, please feel to be in touch directly since those choices are beyond the scope of this series.

A quarter century ago, I realized that the classic strategy process I was taught, and the one still widely used, had real limitations. It called for developing and articulating an organization’s Mission and Vision as the first step in the process. Mission and vision are fine, but why was it, I wondered, that so many of the very same disagreements and misunderstandings that existed prior to developing a mission presented themselves in the decision-making board room only hours after that Mission statement was so carefully crafted?

The insight I had then, one now widely understood and used in the field and recently much disseminated by groups such as GEO and CEP, was that culture trumps strategy. So, the challenge, I felt, was to get deeply into the underlying cultural assumptions of everyone in the room PRIOR to the decision-making process. Surfacing those cultural assumptions had the power of legitimating differing inclinations regarding philanthropic behaviors. [Mission Statements still have an important place in the strategy process, just at a different stage.]

Over the years, as 100’s of foundation clients and those who have taken workshops with me can attest, I have added levels of sophistication about how to get at those assumptions and to lead directly into the next level of decisions that every funder at every level needs to address. Over those same years, additionally, I have formulated the subsequent elements: how to align all of the pieces of strategy – culture, values, focus, capacity, and style to develop an effective implementation. That requires careful alignment of all of the factors that inform those decisions. It is this alignment that makes it all work

As a way to understand this approach, this first piece in the series will address a very contemporary challenge to all of us as funders. While not new, it has never been so crucial as now, nor ever as present in our public discourse – the role of equity in our grantmaking.

To understand this, we need to decide what we fund, how we fund, and who makes the decisions that funding – in this case, about equity.

1. The “what we fund” question seems the easiest – on the surface. After all, social justice, correcting the systemic and endemic inequities that have defined our society for generations, seems to be a no-brainer. There are differing approaches about who should have what role in redressing these ills, but only the myopic or misanthropic deny it is an issue.

a. Compassion: The challenge for most of us is where along the continuum of needs we should use our resources. Compassion may inspire many to provide food, clothing, housing, and other services that provide immediate relief. Indeed, it is typically the first stop along the funding continuum. We see results for a visible problem. Those results may not be lasting, and they are certainly not systemic, but they work – and after all, the food, clothing, or housing is needed now.

For those who desire hands-on involvement, support for their local community or neighborhood, or who want the very legitimate gratification knowing that there is a positive result of one’s personal altruism, this may be a perfect alignment of values and funding.

b. Strategic: It doesn’t take long, for many, to realize that one cannot efficiently or effectively give every homeless person some food or money, so if those categories matter, compassion funding has genuine limitations. Many look for better strategies to leverage their compassion – to feed more people, to house more people, to clothe more people. When we ask the questions of effectiveness and efficiency [and they are NOT synonyms], it leads us to look for organizations that provide those direct services in better ways than we can do ourselves. Our motivations, to make a difference that goes beyond our own individual funding capacity, leads us to examine alternative methods and organizations. This process requires that we need and use additional skills and approaches to make our decisions and lead us to consider a variety of competing claims. For those willing to defer the immediate gratification of direct funding for the satisfaction of a broader and more comprehensive reach to address these same human problems, and willing to put more time and energy into making hard decisions, strategic funding is an important approach.

c. Systemic: Strategic approaches have the advantage of helping make good choices among competing organizations. Not every organization is equally adept at delivering services and not every organization does so in a way consistent with the approach of a given funder. But, for many, even strategic funding is insufficient. For systemic thinkers, the question is not which organization provides food or clothing or housing most effectively, but rather how to eliminate the need for those services at all.

Once one begins to approach questions of equity systemically, it becomes evident that most issues require a multi-sector approach and are not simply a matter of choosing between the best available option. If someone is homeless, it reflects a confluence of failures. A solution also requires a convergence of interventions. No single entity, indeed, no single sector, can deal with the large issues of homelessness, food insecurity, long term economic disparity, education, and, of course, poverty. Each requires public policy responses, private sector investments, social service expertise, and community development organizations – in addition to private philanthropy.

Aligning these efforts is no small task – failures far outnumber successes. Funders need patience, mediating skills, advocacy, a willingness to surrender some autonomy, and a tolerance for failure. A full self-awareness of the elasticity and parameters of one’s funding culture and style are preconditions. If these larger systemic challenges align with your comfort level, it opens up the possibility of addressing and perhaps making a permanent dent in society’s more resistant challenges. If, though, you don’t bring those attributes to the table, it is likely that this kind of funding will prove frustrating and unsatisfying. Alignment matters.

All three of these funding approaches legitimately count as equity funding but not all will work for every funder. Thus “alignment.”

2. How we fund is about the methods we use to get the information we need and then how we make our choices. After all, any subject as big as “equity” has many players, and at many levels, and there are very legitimate competing claims for our resources..

[There is no end to information we can gather about potential grantees, but much of it is not useful, or won’t really be used to make a decision. If you would like further advice about how to understand and effectively utilize the kinds of information that can inform our choices, please be in touch directly. That is beyond the scope of this series.]

Depending on how open or controlling we wish to be in our grantmaking, how competitive or funder pre-determined our method, will help lead to our approach for getting proposals in our docket. As we will see in #330, much of this directly relates to our preferences or choices about staffing, but it also reflects different preferences about how we wish to spend our time, how open we are to innovation, how committed we may be to certain organizations, and what relationship we wish to have with grantees.

There is no single correct/right way to do this, and indeed many funders use multiple approaches. What is clear, though, is that if we are never open to new ideas or explorations from organizations we have never funded, our own knowledge can easily become stale. And since equity has historically been so elusive to achieve, it would be quite shortsighted to presume that our past approaches are sufficient or our knowledge complete.

The implications for equity funding are very real. Those who are committed to established organizations are more typically [not always] more risk averse, and more likely to want to establish or maintain direct involvement with a limited number of organizations. Their confidence in those organizations makes it more likely that core support will be provided, or that new projects will be developed collaboratively. They are more likely to use evidence-based criteria, and it is likely that any projects they fund will succeed albeit in a strategic and not systemic way.

Except for the deepest pocketed funders, this also, typically, leads to organization that are either geographically or ideologically very close to the funders. Very very few funders have the in-house expertise to determine organizational effectiveness all over the place. Similar to the above, it leads to a likelihood to provide operating grants or core support and to be committed to the strength of the organization as a necessary precondition to reducing inequity in the field in which that organization works.

However, as we have stated above, we also know that there are problems that can only be addressed systemically, at scale, and with equal parts guts and patience. Funders open to partnerships and collaborations, willing to take big risks, and accept uncertainty are more likely to fund this way – and therefore will customarily choose to use a more varied process for obtaining potential grantees and projects. If one wants to get at the underlying causes of poverty or the seemingly ineradicable racism in American society, equity issues if there ever were any, we will likely broaden the sources of information, expand the scope of the thinking, and look for intersector opportunities before proceeding. This will usually demand a much longer time frame for decision making and be much more committed to using a not yet proven theory of change.

The alignment issue is quite clear in these examples. At different stages along the way, a funder is in or out, has comfort or doesn’t, considers the challenge within their scope of focus or not. What matters is being sufficiently self-aware to make the choices that will work best.

3. Who makes the decision: For those who have been on the funder side of the table for more than a while, this may seem to be a strange question. After all, one of the hallmarks of private philanthropy is the autonomy it allows. All sorts of people might be invited to have opinions or share their expertise, but the decision about who makes the decision where to give the money is [was] clear – and not terribly negotiable.

The “equity” question, though, forces a different reckoning – and it is here where debate is rampant in our field. And for good reason. Philanthropists and foundations are reflective of the haves. There is an implicitly patronizing element to our work – no matter how genuine and beneficent our affect and intentions. We traditionally give TO those who need it – or, more accurately, to organizations who know who needs it. How often are our recipients in the room, in any of our decision-making rooms?

If one wishes to reduce the divide and responsibly work toward social justice, it means, many now say, that funders need to take seriously the new mantra “nothing about us without us.” They would argue that the real change that must take place is not that money needs to be allocated with care, but who actually makes the decision.. This equity argument has both a practical side [“who knows better than we…”] and a justice side [“who are you to decide what is best for me…”].

Even if one fully endorses that empowerment should be a given, it is far from a given where in the continuum of decision-making that empowerment ends. The arguments range from full surrendering/delegation of decision-making to the impacted stakeholders to making sure that they have seats at various tables along the way.

From a philanthropy perspective, it is far from easy. Succession and surrendering control have proven hard enough when the successors are family. To go so far as to say that the only true social justice philanthropy is surrendering decision making to what had previously been the “recipient class” is a profound and radical leap.

Yet if one is committed to addressing systemic inequities, and eradicating destructive class and financial divides, it is a discussion that one must have.

Alignment in #1 and #2 above are making sure that our way of being funders works best – for us. #3 reminds us that none of our decisions is made in a vacuum. Each has implications not only for how we do our work, but what our values and funding stand for. That is never easy…but always important.

Practica on Funder Collaboratives and Exit Strategies

October 6th, 2018

Richard Marker

The Wise Philanthropy Institute reminds fellow funders that the its most recently updated edition of “Should You Go It Alone? – A guide to collaborations, partnerships and mergers” is available by request. This practicum has been WPI‘s most requested piece for last 10 years.

Now, for the first time, the WPI guide on exit strategies “When the Buck Stops Here” is also available as well. This practical guide has been privately requested frequently, but this is the first time it is being made publicly available.

Both of these are available gratis by direct request – only to funders. For a copy or further information, [email protected]

#282 It doesn’t have to be that hard

June 26th, 2017

Richard Marker

[This post is third in a sequence. It follows “Everyone Can be a Philanthropist, and it is Easier Than Ever”, posted 19 April 2015, and “How to be a Philanthropist on $5/week” [Saying ‘Yes” Wisely: Insights for the Thoughtful Philanthropist, 200 2011]

Among the very welcome developments in our field is that the tools for making informed philanthropy decisions are available to those with lesser means. No longer does one need the traditional intermediaries, nor need one be at the mercy of veritable sales pitches of charities that write, call, email, or stop you on the street. In the USA, there are organizations that rate public non-profits, and others such as Guidestar and the Better Business Bureau that can show if an organization is legitimate. Add to that manuals produced by wealth management companies, community foundations, advisory firms [including ours!], and more.

Yet, the very democratization that makes it possible for all of us to make decisions the way the ultra-wealthy do has made the process of being a responsible donor seem overwhelming, complex, and judgmental. And add to that the all too frequent, and despicable, examples of scams and phony charities that are covered by the media. Is it any wonder that many people are cynical and suspicious at the same time?

Much of my professional life for the last 20 years has been teaching and advising people who want to make informed, ethical, and wise decisions about one’s [or a foundation’s] philanthropic giving. It calls for methodologies and techniques about how to do that reflecting their underlying culture, values, and purpose. It can become complicated. Indeed, the one line I hear from potential clients more than any other is “this was harder than we thought it would be.”

But it doesn’t have to be. Let’s see if we can make this easier. Before getting into some “how-to’s”, a little analysis to guide us.

i. Most of us begin our philanthropy journey at the level of human compassion. We read of an earthquake, we see homeless people, we have a family member who is ill. That human compassion is the basis of charity. It leads us to donate our money, volunteer our time, contribute our used clothing.

There is an immediacy to compassion giving. Someone who was hungry is less so. Someone who has no place to sleep or keep warm now does. To the best of my knowledge, there is no culture or religion or ethnic group anywhere without a tradition of compassion and charity. Giving to a known church, synagogue, shelter, drop in center, or community fund, or even to individuals has a place and is often the pathway to more strategic philanthropy.

ii. It doesn’t take long to realize that none of us alone can feed all the hungry or house all the homeless. As much as we care and are touched every time we walk by someone lying in a doorway or begging in the park or subway, we know that there must be a more strategic way to spend our money and to solve the problem. There is probably an organization that already knows how to leverage our charitable gift to feed more, house more, clothe more, heal more than we could ever do alone.

When we begin to think strategically and make our decisions based on that approach, we transition from being charitable to being philanthropic. It means that we develop a basis for saying yes and no to all the requests beyond who happens to knock on our door or plays on our heart strings. We want to know who is doing it well, who knows how to use my share of the solution-pie most effectively or efficiently or thoughtfully.

It is at this level that it is easy to get stuck. Making decisions means that one needs to know who the players are, what is their approach, whom should we trust, and what our own priorities are. And it means that we have to accept that we will be saying “no” on a regular basis, even to causes that touch us deeply.

This is also the level at which externals play a greater role. We not only want to choose based on our priorities but the “best” within those priorities. Whose “best?” Is second best a waste of our precious resources? And what is all this about “impact” and “metrics” and “outcomes” ….? How is a simple funder to know?

Strategy, informed strategy, helps us choose among competitive choices to be sure, but rarely gets to root causes. For that we proceed to

iii. Systemic solutions. If the level of strategy gives us tools and a methodology to choose among competing options for our attention and resources, the systemic addresses the hope to eliminate the need once and for all, or at least to address the problem at a more macro level.

Let’s look at a single example: food insecurity. We know that giving a hungry person a sandwich alleviates his or her hunger for a little while. Our compassion inspires us to do just that. We have helped feed an individual or several individuals.

We know, though, that it is hardly a way to permanently eliminate food insecurity for that individual, to say nothing of an entire community. When we think strategically, we decide to support the local pantry, soup kitchen, and others that serve an entire community. That is surely a more efficient and comprehensive way than counting on our own generosity to distribute money and food.
However, we also are forced to wonder if this is necessary. In a nation that pays farmers not to grow certain foods, where grocery stores discard still edible produce at the same time many families must choose between rent, food or medicine each month and too many children go to school unfed. There is something wrong with that picture, and pantries alone cannot right that wrong. We see that advocacy for more humane and sustainable public policies and funding is necessary, that food insecurity is directly tied to minimum wages, that equitable distribution of healthy fresh food can make a difference in at-risk communities. Systemic funding allows us to go deeper – so that hunger can be consistently addressed, and that access to food is not dependent on the whims and good will of charitable volunteers.

…..

Now to how to make this easy for those who are overwhelmed:

1. It is ok to say “no” without feeling guilty. In general, ignore phone calls unless it is from someone you know personally. ignore television ads, be cautious of those who stop you on the street. This is not to suggest that all of these people are scam artists or that all calls, ads, or solicitors are doing something unethical. But it is quite demanding to do the analysis to know which is which. No one can do it all.

2. It is ok to give to tried and true organizations. Red Cross, Doctors without Borders, United Way, Catholic Charities, Jewish Federations, the American Cancer Society, and many more have done good work for a long time and support many worthy and urgent needs. You may or may not feel strongly about all of their causes and recipients, and maybe they are not always on the cutting edge of impact, but there is a high reliability that the money will be responsibly, ethically, and legally allocated.

3. It is also ok to choose to support something newer, riskier, or more focused. Technology allows you to do so easily. Organizations such as Donors Choose or Kiva, to take just 2 well known and credible examples, allow you to contribute very directly and single mindedly knowing that your money is going exactly where you want it to. Just be cautious that you know the legal status of your gift. [This is a good example where a call to the Better Business Bureau can give you a quick and helpful answer.]

4. It is ok to give money to a local pantry or homeless shelter that you see is doing good work. [If you aren’t sure of their legal status, you may want to ask if they can show you proof of their tax-exempt status the first time you decide to give them money. Be aware, though, that in the United States, religious organizations are not required to have obtained that legal status] These shelters and pantries are typically doing something worthwhile even if they may or may not be state of the art.

5. It is ok to be passionate about a particular cause or organization and make that your primary or exclusive recipient. Volunteering time and expertise are wonderful contributions as well.

6. As we saw in III. above, it is always important to recognize the limits of philanthropy’s capacity, especially compared to the capacity of government – even at government’s radically reduced level. That is why it is constructive to support advocacy organizations as well as those directly supporting causes and individuals. Two illustrative examples, of many, are ACLU and AARP. Their persistent and consistent pursuit of policies reinforce the work of others on behalf of the powerless and elderly respectively in ways that no individual or local charity can ever do on their own. One can choose to join or support one or more of these kinds of advocacy groups so that you can, easily, leverage your own priorities.

Many readers will say that you are ready for more than this. You have the time, energy, and commitment to go through a more strategic and plan-ful process than this. That is great, and we have much more to talk about – in other posts, courses, in person, and elsewhere. But there are too many who, faced with the abundance of articles and press about big philanthropy, and the even more abundant solicitations, are overwhelmed and feel limited or guilty. These 6 points are for you.