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Posts from the ‘Foundation Practice’ Category

Announcing the Wise Philanthropy YouTube Channel [A request for you to subscribe]

November 19th, 2020

Richard Marker

A REQUEST: Please subscribe.

The Institute for Wise Philanthropy has launched the Wise Philanthropy channel on YouTube. It is now live albeit still in the construction phase. Over time, we will be posting opinion vlogs, abbreviated and selected educational offerings on best practices, and interviews/discussions with others in the philanthropy world.

As we begin to populate the content on the channel, we invite you to subscribe. There is no cost or obligation, and the process is very straightforward [Simply go to YouTube and search for Wise Philanthropy; press the subscribe button]. This will allow us to formulate the most appropriate content going forward, and be responsive to your needs and interests. [ALERT: Please be aware that there are some other sites with very similar names. Ours is simply the Wise Philanthropy channel; for now, you can identify it easily by seeing the videos featuring Richard Marker.]

Among the pieces already in the works are:

– Why Advocacy is a Mandate, Not an Option, for USA Philanthropy

– The Big Lie[s] – Philanthropy’s Opportunity and Dilemma in the Post Election Moment

– A Multi-part Series on Personnel Practices and Cautions

– Strategic Plans are Passé; Scenario Planning is Yesterday’s News; What now?

– We are pivoting so fast that we’re dizzy; will the changes we are now seeing in philanthropy practice survive the pandemic?

and more….

As always, thanks for being colleagues and friends. We look forward to hearing from you.

#395 The Myth of Perpetuity

October 23rd, 2020

Richard Marker

Please note that much of this article alludes to U.S. foundation law. Laws regarding charitable and non charitable foundations differ extensively around the world. Nevertheless, the question of perpetuity applies broadly even if some of the specifics of this article are more limited.

Some years ago, a very prominent Wall Street financier and his wife, herself a very prominent philanthropists, gave a headline grabbing gift to a world-famous museum. The most famous gallery in that museum would henceforth bear their names.

At the time, the story was making the rounds that the museum promised this couple that the gallery would bear their name in perpetuity. The financier asked, “how long is perpetuity?” The museum replied, “75 years.” The couple accepted those terms.

I am not sure if the story is apocryphal, but I was acquainted with the couple and it certainly could have been true. Whether or not, though, it gives an important message about “perpetuity”, one that is worth revisiting at a time when foundation “perpetuity” is on the tables of the philanthropy world.

Before proceeding, it is worth noting that US law does not guarantee perpetuity for foundations. In the US, the law requires a 5% payout plus excise tax regardless of earnings. If the foundation earnings don’t reach that level and beyond, the corpus will shrink; if there are several consecutive years of lower earnings, the corpus will continue to shrink exponentially. If the law wanted to guarantee perpetuity, the law would adjust the spending rate to reflect earnings or at least C.O.L. It doesn’t.

Perpetuity, therefore, is an intention. And indeed, perpetuity is a very, very long time. In my own professional experience, the oldest continuing foundation I have advised was about 500 years old and struggling how or if to continue since all of its legally mandated conditions had long since become irrelevant or expired. Most foundations, even those that aspire to “perpetuity” are much, much younger than that. I wonder how many of them really believe that they will be around in 500 years.

A more accurate description, then, of these foundations is “open-ended with no pre-determined time limit.” The hope of the founder is that successor trustees will align spending, investments, and governance policies sufficiently well to keep it going to make an impact generations hence but history has shown that true immortality requires something more than a large bank account.

This adjustment of the concept is consequential in terms of foundation decision-making. Most of us have been in rooms when one or more trustees makes clear what they believe their role is to be “stewards” of the foundation resources to last for generations. If perpetuity is the defining variable, stewardship is a credible approach to their role, and their approach to the foundation’s philanthropy.

The problem with “stewardship” as the primary motivator of philanthropic decision -making is that it focuses more on the finances and less on what the money can do. This is not to dismiss the authenticity of respecting donor intent, i.e., honoring the legacy of the family and foundation founders, but, functionally, it often means taking the most restrictive approach to the resources. True, if properly conceived, a “perpetual” foundation can serve to keep family connections alive, to remember the impact of the founder, to exert influence in a particular place over time. However, in too many cases, the idea of “stewardship” is so engrained that it instinctively negates public benefit investment strategies, and it serves to diminish the willingness to take even prudent risks with philanthropic dollars.

The flip side of “stewardship” is not “spend-out” – we’ll come to that later. It is, rather, to start from a different mentality that focuses on the philanthropy and not the money, i.e., the mentality of what good can our philanthropic investments and grantmaking make during the time it is under our auspices. The challenges at any given moment, and certainly of any given generation, can never be fully anticipated, no matter how prescient one may be. Therefore, current trustees can feel fully empowered to makes decisions that may respect their legacy while being thoughtfully creative. This approach refuses to kick the hard decisions down the generational road but accepts them now. And it recognizes that each successor generation should feel similarly empowered.

Not long ago, I had the privilege of working with a family foundation the size of which was about to grow well into the upper 9 figures. The family knew that not long from that time, the responsibilities of succession would fall upon them. Yet they were a bit stymied because they couldn’t get the founders’ generation to articulate what they wanted their foundation to do and be. Finally, the widow of the founder made it very clear that she wanted them to be free to decide. After all, she said [here slightly paraphrased], “I could never have imagined what the world was going to be during my lifetime. How can I know what my grandchildren’s and great grandchildren’s world will be like? They have to be free to make their own decisions.”

This decision liberated those generations at the table and those not yet born to be empowered and not simply stewards of inherited wealth. There was no implied message of perpetuity, but there was also no time limit on how long the foundation should continue. The presumption was that subsequent generations need to be empowered to decide that question as well.

Let’s now come to the question of “spend-out” or “time limited” mandates. This is, of course, not a new discussion – Andrew Carnegie and Julius Rosenwald were two extraordinary and influential philanthropists who made quite different decisions. Various Carnegie endowments continue to this day; Rosenwald specified a terminus ad quem for his foundation Most of those who have established endowed foundation assumed that they were to last indefinitely. It is certainly true that most wealth advisors would recommend investment strategies consistent with those assumptions.

There are, though, two significant challenges to the idea of open-ended foundations. One is efficacy, the other ideology.

The efficacy argument is an easy one: if one wants to address a problem – whatever that may be – a dollar spent today is better than 5 cents. Why not throw as much as possible on an identifiable and presenting scientific or social or educational issue on the certainty that it will surely make more of a difference now and may even solve a problem. [e.g., the Diamond Foundation’s successful “all-in” on HIV-AIDS.] And, while no one can anticipate new challenges in the future, the more one can solve today, the more likely those unanticipated ones can be addressed effectively in their time.

The ideological one is quite different. It challenges the very nature of [mostly] tax free accumulation of wealth controlled by those who had nothing to do with the creation of that wealth. [For this article, I will table the much-needed conversation about the shocking transfer of wealth from the middle class to the very wealthy we now have in America. And I will also defer comments on “The Giving Pledge” to another time] A foundation that lasts for generations essentially transfers power from generation to generation, perpetuating a class and economic divide. Those who control perpetual/time-unlimited foundations can exercise that power without accountability for their decisions [other than that required by law]. Indeed, there is no requirement that the intended beneficiaries have any say in the decisions even though they are the ones most impacted. This conceptual challenge is not new but has become vivid and vital during the recent months as the USA has been forced to acknowledge our stark racial and economic divides.

Readers of this piece are well aware of some very welcome initiatives in our field to redress this. In prior articles, we have discussed the work of Participatory Budgeting, Trust Based Philanthropy, CEP, NCRP, and others and many other funders are struggling mightily with what all of this means for them. These initiatives try to readjust the power base, the decision making, and the accountability loop. But, with very few exceptions, these initiatives are agnostic about perpetuity.

A number of prominent foundations have made clear that they fully intend to spend-out their resources within a specified time. But it is not yet clear if those foundations are outliers or part of a new normal. [For the last few years, that is one of the most frequently asked questions when I give presentations on philanthropy trends to funders in the United States and around the world.] Some have already closed and much has been written about their decisions and their exit strategies. As one reads the motivations for doing so, there seem to be two motivations – the efficacy argument presented above, and the ability to make the decisions while still alive to do so.

I am happy to be proven wrong, but I have not seen any of the foundations choose to spend-out for the ideological reasons. One wonders, though, if that will change as an ever larger percentage of funders and philanthropists become self-reflective in the face of the challenges to inherited power, the recognition of endemic racism, and the moral repugnance to the unconscionable economic divide.

There surely is no one right answer to how long our funds should last, but I would urge all of us to drop the concept of “perpetuity” and replace it with “open-ended.” None of us lives forever – and until proven otherwise, neither does a foundation. What matters, in the end, and what makes a difference in how worthy our legacies, is not how long a foundation lives but how thoughtfully its resources are used.


The Institute for Wise Philanthropy has been educating and advising funders, philanthropists, families, and philanthropy associations around the world since 2002.

Partnerships and Collaborations

October 7th, 2020

Richard Marker

The annual update of the Institute for Wise Philanthropy‘s check list for effective funder partnerships and collaborations is now available by request. This has been our most requested practical “how to” for over 10 years. Contact us if you would like your copy.

This is a link to a presentation on collaborations at a recent OPAL conference:

https://drive.google.com/file/d/1Yy_DAQA1tIFgrah-pPsNSLkFeBgA5mJm/view?usp=sharing


The Institute for Wise Philanthropy has been teaching and advising philanthropists, foundations, families, and philanthropy associations around the United States and elsewhere in the world since 2002.

#393 Why Transparency and Conflict of Interest Matter so much in Philanthropy

October 6th, 2020

Richard Marker

Yes, I will get to the philanthropy part in a bit, but first….

On Friday morning, I awakened to the news that the POTUS and his wife both had tested positive for the Coronavirus. As many of you know, I am not among the great sleepers, so I learned this information at 4 am. At the time, in response to some social networking posts, I predicted that by noon on Friday, there would be a slew of conspiracy theories surrounding this announcement.

I was wrong. It didn’t take that long. In fact, by breakfast time, I had already begun to see skeptics on both sides. Some of the theories were so far-fetched that they could only come from truly skewered perceptions of the world – or perhaps Russia. But others were unlikely but almost credible. Was this a staged event? If so, what was the intended scenario?

The President’s own physician, as we all saw, didn’t help matters since his Saturday update was itself not credible, or lacking in enough detail to be considered so. What was not being said? The reported timeline was, on its surface, impossible. The answers to questions were evasive and filled with lacunae. And when it was made clear to the public that the POTUS had to approve all public statements about his own medical condition, those missing pieces and inconsistencies took on even greater weight. Why should these reports be any more true or reliable than the hundreds upon hundreds of distortions of fact and outright dishonesty that have characterized the entire period of this presidency?

Is it any wonder that skeptics and conspiracy theorists and cultists all believe that we don’t yet know the full story – or that they do know the full story but the rest of us don’t? [For the moment, assuming that he does have “the Virus”, we cannot yet know the full story since the disease needs time to play out – even in the most normal of courses.] When the absence of transparency is the norm, when obfuscation is the practice of choice, and when information becomes weaponized, even those who might start with a sympathetic benefit of the doubt find themselves “just wondering.” Even if one grants that what and how to share personal information in an unfolding medical situation is not always easy, especially in a politically charged moment, the history of the absence of transparency makes everyone a bit dubious.

Well, as I said above, this piece is about philanthropy, not politics. So…

Those of us on the giving side of philanthropy are challenged with similar decisions in our own work. Rarely are those decisions as internationally momentous or as existentially portentous as the information on the medical status of the POTUS, but they do matter. Our choices can sometimes mark the life or death of organizations; more often they do have a direct impact on their health and sustainability. Those funding decisions can shape the social, ethnic, artistic, or educational landscape in profound and defining ways. And while philanthropic dollars alone cannot [and should not] sustain the entire not-for-profit and public-benefit sector or any subset of it, our dollars do define it and influence it. A lot depends on us.

Credibility, therefore, matters. Our credibility matters a lot. Grant seekers want to know what the rules are. Is the process fair or rigged? Do you have to know someone? Can they tell the whole truth about their organization or must a rosier-than-thou picture be presented? They know that somehow a decision will be made that has an impact, and rarely do they know how.

Yes, the funding world is more than a bit inscrutable. Competitive grantmaking is filled with uncertainty for those who seek funds. Unless a grant is defined by entitlement [i.e., if you meet certain criteria, you are guaranteed funds], a very rare condition indeed, every submission is being measure against a series of criteria, some of which are pre-defined, others of which are subjective.

Having been inside lots of those funding rooms, I can attest to the subjective nature of many decisions. But not for the reasons you may think. Most funders and foundations really do want to make good decisions, informed decisions, constructive decisions. We are human so there is no denying that we bring some of our attitudes and assumptions to any decision, but even allowing for that there is a subjective uncertainty. The reason, of course, is that we fund the future. Even with the most evidence-based choice, the best one can do is acknowledge the odds and the risks. As a proof-text: How many funders who made decisions about what to fund at their December 2019 board meetings got it right about what would happen to their grantees in March 2020?

What we owe the not-for-profit/public benefit field is that they can trust the process and that the decisions aren’t phony. Grantees may be disappointed and wish that they knew why they weren’t chosen. It isn’t always easy to say – any of us who have been faced with large dockets know that sometimes there isn’t a good reason. A whole bunch of proposals may have equal merit, but one has to be selected. That doesn’t mean the ones not selected were less worthy or tragically flawed. Try to tell a disappointed almost grantee that there really wasn’t anything to learn, it was just someone else’s day. Even if true, it won’t make them sleep any better.

In order for the system to work, non-profits have a legitimate expectation to know what our process is, and to be able to look at our decisions and feel that we, the funders, have been true to that process.

But for that process to work, we as funders also need to rely on genuine information from nonprofits. It is not only that insufficient information or inappropriate hyperbole may distort our decisions, but it will make it that much harder to really understand what interventions and solutions will accomplish what we both want. Transparency must go both ways. As one who has been in the philanthropy field for a very long time I can certainly give examples of willful dishonesty by those who have received or desired to receive grants, but those examples represent a very small percentage of the field. For most, if there is an insufficiency of information, or a far too optimistic articulation of capacity, it is well-intended and based on an uncertainty how to tell their story.

The burden to make openness possible is on us as funders. We need to create the environment of trust and honesty. We need to make clear that we really do need to learn from those who actually do the work we think needs to be done, and we really do need to understand what challenges, financial and otherwise, might keep that from happening.

That is why transparency of our process is indispensable.

Which brings me to conflict of interest. This is one of the most misunderstood areas on the not-for-profit landscape. Conflict of interest is not the same as self-dealing or self-inurement. Those are illegal so that is that. But in this sector, conflict of interest is an ethical question. It acknowledges that in the real-world people have competing claims of loyalty. Some of those competing loyalties may be de minimus; others may be substantial. We must reveal those competing claims, and then our boards must make an a priori judgement about what circumstances would be problematic. Sitting on a board of a foundation and also of an organization that has applied for funds in a competitive process pretty much demands recusal, at least. Sitting on the board of a foundation and also a local agency that has received funding every year for 25 years may be ok. As funders we need to take the appropriate action so that there is no possible misperception about how those competing loyalties play out when the funding docket is on the table. Organizations asking for funds have a right to know that we are aware of and addressing those conflicts – before any funding decisions are made. That is how trust is built.

For those of us in the funding world, the months since March have been a wake-up call to us about how much of what we “normally” have done has been to meet our own interests, needs, and priorities as much about those who are asked to deliver on those priorities. The vast majority of us have always been well intentioned and thoughtful but we learned that too often we hadn’t been listening to the real vulnerabilities of our grantees and their communities. All too often our processes have been needlessly opaque and byzantine – far from transparent. All too often those who make the decisions are inadvertently myopic, having an unintended conflict of interest. There may be legitimate disagreements about who should sit on what boards and who should make which decisions, but transparency and directness in acknowledging them will go a long way to sustain the viability and efficacy of our sector… especially at a time when the world needs to have confidence in us.

These are not easy matters to address as those who have undergone reviews by CEP or NCRP or participated in Trust Based Philanthropy programs or in our classes in philanthro-ethics can attest. But meaningful transparency is a sine qua non for long term success in our field.

And, let’s be honest, it would go a long way in the larger political world as well.

….
The Institute for Wise Philanthropy has been teaching and advising funders, foundations, and families throughout the United States and elsewhere in the world since 2002. We welcome your inquiries.

#391 The Elusiveness of Excellence – We Funders are not Exempt

August 10th, 2020

Richard Marker

A couple of years ago, my accumulated professional careers crossed the half-century mark. Knowing of my untypical journey, a number of people asked if I was planning to write an autobiography. While I don’t believe a full autobiography is warranted, I have written a pamphlet-size retrospective built around lessons learned. It will be published sometime this Autumn.

While writing, I was reminded of a number of influential episodes, some of which are applicable to current developments in the philanthropy world. This is the second such article; you may find it helpful to read #390 prior to this. Others will be posted periodically.

In this article, the applicability to those of us in the philanthropy world comes toward the end.

It was not that many years ago when Jim Collins “Good to Great” and its follow up “Good to Great in the Social Sector” were on everyone’s canon of required reading. It may still be but if so, I am not hearing it spoken about. Primarily built on retrospective examinations of what seemed to characterize those companies [and, subsequently, nonprofits] that have excelled over time, Collins challenged some B-school orthodoxies, and reminded everyone that it takes disciplined work over time to achieve that greatness.

I suspect that the book is less celebrated today because the dozen or more years since its publication have not been particularly kind to all the winners of which he wrote. Now, it is quite true that it was published before the recession of 2008-2010, and certainly before the current upheavals in the economic and social sectors, but many of his lessons are still valid, and worth the read.

When I look at his books from the retrospective of my own career, I see a divergence between what I accomplished as an executive, and how those related to my own personal accomplishments. They are overlapping, but not the same.

Before proceeding with the extrapolations to our philanthropy world, let me share a very significant personal story that made a difference to my own career and to my understanding of what “Good to Great” can really mean.

Many of you know that over the last couple of decades, my skills as a speaker and educator have been celebrated and nicely compensated. Verbally communicating to audiences small or large in 40 countries around the world became a key source of my compensation. I am a proud Legacy member of the National Speakers Association/Global Speakers Federation – membership in which is only open to those who can demonstrate that we are actually paid to speak.

Those who have known me only for the past 23 years may not know that I wasn’t always so excellent at this. My professional life had always required me to speak in public. I was always comfortable doing so, and always thought that I was good at it. Indeed, I had overflowing files of letters thanking me, and I had my share of standing ovations and plaudits. If you had asked me before 1997, I would have said I did it well.

Yet, I often wondered why I wasn’t being invited to give certain speeches that I felt I was as least as appropriate to give as those who were chosen. It was Mirele, to whom I have been joyfully married since 1995 and who knew me in professional contexts even before we became a couple, who set me straight. After we were married, she began to see that I was more frustrated by this than she had realized. Finally, she told me the truth: “If you really want to know, you are not consistently so good. You have great mastery of the content, and wonderful rapport with audiences, but your talks are, well, not consistently great.” [Admittedly this is a paraphrase, but a fair one.]

She said that if I was serious, I should work on my speaking skills. Now this may seem strange, but until that time, I had never had a course in public speaking, and, more important, no one had ever given me negative feedback.

And now we are getting to the crux of the message:

It appears that I was never so bad that it was worth it to anyone to tell me how I could have been better. I was sometimes only “fair”, maybe sometimes “excellent” but mostly “good.” No one had anything at stake in telling me that I could or should have done better. Until Mirele did.

I signed up for a mentoring program at the National Speakers Association and discovered something very quickly – I was undisciplined. I had all of the skills and knowledge and presence and I thought that was enough. But then I learned the discipline of how one organizes a presentation. I discovered that I still talked like an academic even though I had mostly left academia over a decade earlier. People did not want to know how many syllables I could have in every word; they did want to hear stories that illustrated what I was talking about. They didn’t want to be impressed with how much I knew; they did want to know how that knowledge could make a difference to them. [You know the old mantra: “nobody cares what you know until they know that you care.”]

Within 6 months I began to have evidence of the transformation. I started getting invited to more places, but more to the point, invited back! The character of the thank you’ s was markedly different.

I look back on so many squandered opportunities over the years and wince. I asked myself “why didn’t anyone tell me?” If I could go from just “good” to “excellent” in only 6 months, think about what I might have been able to do had someone held a mirror to me, or had the courage to tell me.

And now the message: the only person [other than a loving spouse] who really cares if you go from “good to great” is yourself. If you want to excel, you have to make it clear to others – and safe for others – to tell you! For most others, “good” is good enough. As I said above, what stake do they have in pushing you to excellence? Most of the time, your personal aspiration is at best only incidental to them or their work.

It also made me rethink prior parts of my career: I am pretty confident that I pushed organizations that I headed or was a trustee of to become high quality performers; I am less confident that I helped colleagues and supervisees reach that level in all they ways they could. Or maybe should have.

Having learned that skills and knowledge are insufficient without the discipline to apply them means that one has to work hard to not become complacent. One of my favorite, if embarrassing, cases about my own complacency goes back to a time when we were invited to Buenos Aires to give some lectures. One of the talks was to university students at 10 pm on a Saturday night. Shockingly, it drew a very large crowd – I learned that I was the entertainment before a night of dinner and dancing. Before speaking, I did my homework, and learned the names of all the hot spots that young adults frequented. I peppered my talk with those references, and I was a star! Two years later, we were invited back, but I was complacent and didn’t bother to update those references. They were all passé. And, while the talk was more or less well received, my star quality was seriously diminished. I have been back since for other audiences but not for the young adult crowd. Serves me right.

At the present time, the foundation and philanthropy sector are doing a lot of soul searching about our decision making, about our governance, about our priorities, and about our role in society. Groups such as CEP, NCRP and others are pushing us to go beyond our long-term self-satisfied [and often self-congratulatory] complacency to respond to systemic issues of racism and economic inequity. Impressively, many in our sector are taking these challenges seriously. Good enough is simply not good enough anymore.

The challenge, though, is if we can sustain this attention, momentum, and operational change over time. In the midst of a pandemic of public and of persuasive challenges to the social weal, it is evident that we must respond. But when there is a vaccine or a change in administration or a recognizable sense of normalcy, will we as funders find it all too easy to become complacent? Or will our commitment to endemic and systemic change propel us to internalize the discipline to sustain excellence?

That discipline will prove the harder challenge – one from which we must not back down.

#385 – I’m Not Traveling; Why Should my Money? The Surprising COVID-19 and Racial Inequity Dilemmas for Funders

June 15th, 2020

Richard Marker

NB: This was written but not published prior to last week’s announcement by 5 major foundations of issuing debt as a way to get more money to the field. In many ways, that extraordinary development only underscores the dilemma discussed here.

As you may recall, when the COVID-19 quarantine began, I extended an offer to any funder anywhere to provide a pro-bono problem solving session. This post in an extrapolation of some underlying themes that I have gathered from those conversations and from the slew of many articles on funding choices at this time.

What has emerged for me is an interesting challenge from funders of less than mega-means. Choosing where to put funds comes down to hard choices, and those who fund on the local level/place based, are particularly sensitive to the implications of saying yes and no. Yet over the last few years, many of those funders became aware of the need to address systemic issues and were more open to funding national initiatives, sometimes at the expense of place-based funding. [Please see #293, 27 Dec 2017 and #337, 26 May 2019 regarding the significant continuing role for place-based funding, even when a funder is fully aware that the local organizations being funded can never aspire to the excellence of world-renowned organizations in the same fields.]

I cannot imagine that any funder or foundation is unaware of the financial challenges facing all non-profits, and the catastrophic challenges facing some. [I recommend the very recent survey published just this week by CEP on the unevenness of funding at this time.] Surely all funders know that their long-time grantees are in need. And, hopefully, every funder is aware of at least one local collaboration to address the massive local needs – even if that hasn’t previously been a core priority.

Moreover, it has been gratifying to see that hundreds upon hundreds of funders are learning that this is not a time for complex reviews, clever new initiatives, and burdensome reporting. It seems from the data that I have seen reported by others and anecdotal [no claim that it is scientific] evidence, most funders have either sent more money out the door, plan to spend more this year, or have committed themselves to funding new or ongoing needs in the next grant cycle.

Most of this is local.

At the same time, never has the need for systemic redress been more glaring. The funding community had been coming around to understand that band-aid type funding of societal needs of all sorts is far too short-term and nearsighted. Acknowledgement of the role of advocacy, providing support for national organizations addressing systemic issues, and seeing how existing funding aligns with underlying systemic needs has finally been high on the agenda. Both the pandemic and the BLM moment have starkly underscored the validity of those needs.

However, I am hearing, given how massive the local needs are, how can one justify diverting resources from “here” to “there”? Shouldn’t that be the job of the deepest pocketed funders whose focus is rarely place-based directed? Even if “woke” to the needs, perhaps this is the time to pull back from those national initiatives to focus on this place? After all, the putative systemic issues are visible right here – on our streets, in our schools, in our neighborhoods, in our policing, in our healthcare, in our workplaces.

I don’t disagree with the logic of this thinking, and for many it is a very valid way to go. But I also want to remind of the importance of not losing a connection with the groups with a larger and summative perspective, whose expertise allows alignment between current urgent need and optimal policy so that local funders don’t inadvertently reinforce counterproductive systemic causes, whose analyses of experiences elsewhere might provide a more laser focused use of local funds, and whose understanding of the political landscape might provide leadership in much needed policy reform.

Perhaps a single example will illustrate – and please excuse that this is a summary that elides some important local details: A couple of years ago, not long after we moved to the DC area, the government was shutdown for an extended period of time. The shutdown was felt throughout the country but, not surprisingly, hit the DC area hardest. Many in the local funding community stepped up with a variety of palliatives to alleviate very real hardships faced by many thousands of furloughed government employees and contractors. When the government re-opened, a meeting of many locally based funders was convened to address lessons learned. At the meeting, I [still a newcomer] asked if there had been any conversation with or utilization of material prepared by the Center for Disaster Philanthropy. To my surprise, no one in the room had heard of the CDP. As the local funders listed all the things they had learned and their commitment to document those learnings, it struck me that they had spent a long time largely reinventing the wheel – when, in fact, they could easily have adapted many of CDP learnings from many other natural and human-caused disruptions.

It is true, of course, that all politics is local – and most funding for many funders is and should be local. But just as local politics does not and cannot address systemic issues without national policy change, so too local place-based funding without a connection to the larger context in which we operate is insufficient.

Many of us would like to hope that the societal lacunae exposed by COVID-19 and by endemic racism will make this the time to finally address the systemic in real and transformative ways. So, while we absolutely must increase our support for and engagement with our local communities, we do need, as well, not to lose sight of the knowledge and wisdom that can come from continued engagement with organizations and affinity groups that extend beyond our own backyards. It need not be “either/or” but should be “both/and”.

#378 Whatever Happened to Noblesse Oblige? Have We Gone too Far? – A COVID-19 Takeaway

May 15th, 2020

Richard Marker

This is our 12th article for funders, philanthropists, and foundations regarding COVID-19. As always, we welcome your thoughts and reactions to any and all.

Two decades ago, noblesse oblige was still the standard rationale for funders to be charitable and philanthropic. If asked why one gives, the answer was likely to be “to give back.” With riches come responsibilities.
The underpinning of that thinking is that there are those less fortunate who need something that a generous gift might provide. While most funders had opinions about which organizations or causes they cared most about, on the whole giving had a social context, in every sense of the word. Some of that social had to do with communal leadership responsibilities; some had to do with responding to peers’ requests. Most funders didn’t assume that they knew better than those who worked in the fields they funded about how best to use the money, only that the recipients certainly needed it.

Approximately two decades ago, a mostly healthy corrective began to supersede that rationale. For all sorts of reasons, the subjects of all too many books and articles that one can read on this subject, loyalty was summarily discounted as an imperative for supporting organizations, and measuring impact became the new value-added. After all, why continue to support a literacy initiative year after year if people still cannot read? Why do organizations dealing with homelessness warrant support if there are still so many homeless? The motivation for giving thus morphed from altruism to efficacy.

At first, there was denial from legacy institutions. Despite the growing anecdotal and statistical evidence to the contrary, those 20th century institutions convinced themselves that this was simply a temporary or transient aberration. When people got older, got married, got jobs, had kids, their giving patterns would revert to the past practices of their parents and grandparents. As time went on, as the change became more pervasive, it also became more persuasive, and many of those organizations had to pivot to find ways to catch up to the zeitgeist. Some did and some never did.

In the meantime, newer funding models emerged, all of which were based on some sort of measure of impact. There are a variety of models of those systems, often differing on what the true bottom line of effectiveness is, how far out a longitudinal perspective must look, which stakeholders or sectors have the greatest claim, how subjective the giving might allow or how comparatively demanding the objective claim, how “profit sector” they behaved, and more. Not only did funders not feel any assumed loyalty to organizations, but their giving was increasingly conditional. “We will fund this – IF you do that” or “We will fund that as long as you can demonstrate that our metrics are being met.” Not only did it reflect the changed motivation for giving, but it changed the way organizations had to deal with funders.

Implicit in all of these changes was a set of assumptions that have proven all too specious. It assumed that funders knew better than the experts what would work, how to do the work, and what constituencies deserved service. After all, funders made their money in the for-profit world; that alone, they believed, demonstrated that they must know more than those who are stuck in the non-profit world. [Need I say more?]

Over time this led to the institutionalization of attempts to develop standard ratios – such as “overhead” to program, or appropriate balance of sources of income, or cash reserves. Using these new metrics, some organizations began to rate nonprofits, and woe to one whose rating slipped. Eventually, though, most of the raters saw that they were imposing a very limited and limiting set of metrics to a very complex field. Did it really make sense to use the same rating system for a local food pantry as for a university? And if that food pantry were to have a mediocre rating but was the only one in a food desert neighborhood, would that be sufficient reason to discontinue funding it?

Thus, over the last few years, more sophisticated means of determining impact have been developed. [including, inter alia, the cutting-edge methodology developed by the UPenn Center for High Impact Philanthropy with which I have a part time connection.] These looked more deeply beyond simple-to-measure efficiency and to longer terms effectiveness as a means to decide where to put substantial funding. There is no doubt that our funding world was developing ever more useful way of making sure that our resources were used to bring about the changes we hoped for and in the ways that made the best use of our money.

Then COVID-19 hit.

And, suddenly we recognized that, for all of our sophistication, for all of our rigor, those non-profits on the ground doing the daily hard work were certainly better equipped to know where the immediate needs are, where the preferred interventions should be, how to spend precious dollars, and which skills are most applicable. Our field – or at least 700+ foundations and philanthropy support organizations – avowed [or perhaps acknowledged] that our reporting systems, our proposal systems, our laser focused funding approaches [and perhaps even our investment policies] were no match for the needs of the moment.

Maybe, we had strayed too far from the long standing, seemingly dated noblesse oblige rationale for giving. Maybe our demand for metrics, too often based on our categories, contingent on our priorities, reflecting our own systems overwhelmed the reason for philanthropy in the first place. Maybe, we are being reminded, that altruism is a social value, and that our own demands for systematic analysis everywhere along the line may be handcuffing those whose real job is to provide services to those in need.

Over 20 years ago, my first published article on philanthropy was entitled: “Hubris vs. Humility”. At that time I was the CEO of a major foundation, and I learned how easy it is for us to think we know everything, how fortunate we are to have the resources to try to make a difference, how seductive the power imbalance – and how arrogant so many of my colleagues appeared. [Of course, I never was. 😊] But I also recognized that, not only was that ethically problematic, but it was also pragmatically wrong. After all, it meant that grantees were less likely to be fully honest, that it allowed us to pretend that we are never wrong, and it allowed us to function in a self-referential bubble.

Over the last couple of decades, our field became so committed to the efficacy of impact and results that we often forgot about the nobility of “giving back.” COVID-19 seems to have forced a rebalancing. Perhaps a bit overdue.

Endnotes: I know my colleagues in the field quite well and can anticipate some rebuttals, so permit some addenda:

• Yes, funders sometimes do have perspectives or expertise their grantees lack. But even when a funder is more “right”, implementation should rarely be top down and requires a relationship that allows the “right” and the “real” to become aligned.

• Yes, of course there were always funders who wanted results – even in the days of noblesse oblige. But before the days of impact and metrics, the norm was more typically that funders gave, nfp/npo’s spent.

Yes, due diligence and program evaluation is indispensable. But too often due diligence and the post program evaluations go way beyond gathering information that will truly inform our decisions. If we as funders don’t need the info, why impose extra work on grantees?

Yes, there is great value in research as a basis for sophisticated decision making – but… One admittedly extreme contrary example: in an Advanced Grantmakers course I taught a few years ago, I invited a guest speaker who was considered the national expert on a particular then- hot initiative in the field. It turned out that the expert whose work was widely published, had never met with any foundation, never worked in a foundation, never spoke with any practitioners. I am sure that no one knew more about the research or the laws related to that initiative than the guest speaker. However, the “expert” was fully unable to answer a single question on its functional application from the room full of very experienced funders. Surely this is indeed an extreme example; it does, though, remind us that research that isn’t rooted in real experience is simply a contribution to general academic knowledge, but of questionable value to those who must make decisions on its basis.

Yes, I agree that there are certain times when a restricted gift serves the grantee organization. 2 examples: when a non-profit wants to explore an initiative beyond its core budget; or, perhaps, when it is for a capital project. But in general the tendency of some funders to give only restricted gifts, to be unwilling to fund infrastructure of that same organization, to give for a year at a time, to give less than the amount necessary for the project to succeed, etc. typically handcuffs the recipient organization and limits the ability of that organization to bring the impact the funder claims to want. Our funding should enable the greatest likelihood of the success of a project. That doesn’t mean there should be no limits; it does mean that a funder must make sure the relationship with grantees is open, honest, and trusting. Given the power imbalance, that relationship only works if we as funders enable it to.

Final point: Yes, it is true that I have been teaching and advising funders on how to make good decisions for a long time and hope to continue to do so. So, I don’t want to appear disingenuous in my statements about overreach in due diligence. My hope is that we as funders “right size” our processes and decision making – to make our own lives and the lives of those whom we empower with delivering services easier.

#376 Should Funders Change Our Strategy in Response to COVID-19?

May 10th, 2020

Richard Marker

This post is a continuation of a series of responses to COVID-19. It was first written mid-April, but wasn’t published until now. It continues some themes originally discussed in #365, published on 18 March, and #366, published on 22 March. Since I first wrote this, a number of colleagues have begun addressing philanthropy strategy from a variety of perspectives, some echoing what I wrote then and here, others who take quite alternative views. Hopefully, this will add to our field’s very robust discourse.

Before exploring this question further, let me associate myself with the broad range of foundations, philanthropy support organizations, and other funders who have committed ourselves to increasing payouts, smoothing processes, and being agile during this extraordinary time. It is the right thing to do at what is surely an unprecedented time – at least in scope. The pandemic has exposed the not so hidden but easily overlooked fragility of much of the volunteer sector, the deep-seated racial and class divides in American society, the price of government’s years of retreat from a commitment to the welfare and health of most Americans, and, en passant, the all too often inscrutable and byzantine ways in which our funding community works.

It has been right that we as a field have demonstrated an agility rarely seen before and played substantial roles in literally putting our money where our mouths are.

But that is not the same as throwing our strategies out the window. And it is here that I call for caution. A few key points:

1. History has taught us that we, as funders, need to keep some of our powder dry. After disasters, compassion giving is quite widespread. But disaster exhaustion follows close behind. It isn’t clear if COVID-19 will follow the pattern but there is certainly reason to feel it will. After all, people are stretched, foundations are reaching way beyond normal giving patterns, and the government is printing money. After this stage stabilizes, whatever that may mean, will funders feel that it is time to move on or catch up even as the long-term impact is still being felt?

2. Moreover, there is likely to be some sort of recession. Even if employment returns some of the millions to the workplace, most projections assume some permanent losses. And while the markets have shown more resilience than the general economy, a rapid upswing is unlikely and therefore there won’t be replacement funds for the beyond-typical spending of the moment.

3. No one can fully anticipate the full scope of residual or recovery needs. Will there be food shortages as some predict? Will there be a surge in needs for psychological care as some others predict? Will our education system discover that it is in disarray and needs sorely needed funds just to get back to its prior less-than-adequate place? Will the numbers of non-profit closures raise new and severe issues of basic services to the most at-risk communities? Will the forces of xenophobia, racism, antisemitism, Islamophobia, Sinophobia have become so emboldened that we have overt social disruptions? None of these scenarios is very farfetched, and each would require real attention from funders.

Therefore, it is imperative that funders, especially foundations, resist the urge to spend it all now. Even if this is the proverbial rainy day that we have been saving for, there will be clean up for a long while for which we need to be prepared.

Moreover, if we had done our strategy work well in the past, we should have strategies to guide us through these and any unplanned times. If we always did the same kind of funding to the same institutions, we wouldn’t need to devote too much time or energy or thought power to the “what-ifs” or to competing claims. [It is a legitimate if limiting funding approach.] For most of us, we need strategies because we must make choices among competing legitimate causes. And since one never knows when something unanticipated comes along, we need strategies that can inform our responses at those times as well. Therefore, every organizational strategy needs to leave room for flexibility of implementation. If a strategy doesn’t allow for an implementation that can respond to the unknowable, it is too stringent a strategy.

Now, there is a difference between pure compassion giving, i.e., simply responding to the emotion of the moment, and flexibility in one’s strategy which allows an adaptability consistent with established priorities, values, and an understanding of where one’s resources can be most effectively used. Agility is not the same as anarchy.

Foundations and independent funders have a unique and enviable combination of attributes that should inform an effective and appropriate strategy guiding our decisions: Because foundations and independent funders have no plebiscite, no election to prepare for, no funds to raise, we can exercise both the vantage of thoughtful perspective and the agility to apply them in careful and adaptive ways. No other institution can claim that level of autonomy and that combination.

Thus, I would argue that, even if a foundation chooses to spend more of its endowment, change its allocation process, and revise its own ground rules, or an independent funder chooses to alter our “normal” way of giving, that need not and should not mean that we must cast aside our carefully articulated and crafted strategy. This message has never been more important to underscore than now, during the COVID-19 Pandemic, when pressures are so great on all of us.

#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.