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Posts from the ‘Philanthropy Trends’ 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.

OPAL Panel on Philanthropy Responses to COVID 19 [video]

November 1st, 2020

Richard Marker

https://drive.google.com/file/d/1XyHI7UYp8VLqWnfSjveT8RcQ-L6HN7YC/view?usp=sharing

#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.

#394 Must Scale Be a Precondition for Sustainability? [Corrected]

October 13th, 2020

Richard Marker

This is a hardly a new question. [Long time readers may recall several previous articles raising similar questions: “Right Sizing…” Dec 2016; “Winning Small….” July 2018; et al.]

Most for-profit businesses rely on scale. Nonprofit business models struggle to achieve scale. Funders, deciding on the viability of their non-profit grantees, should ask the question. Is scale a precondition for long term sustainability? Should it be?

The issue is more poignant and pressing today than ever. The viability of many in the non-profit sector, the conceptual and capacity challenges to funders everywhere, the recognition that philanthropy can never be separated from public policy all converge to raise questions about whether the operative business models for non-profits of the last period of time can still be valid.

For the last couple of decades, the assumptions about non-profit viability has been heavily informed by b-school thinking. Funders of established organizations have pushed organizations to be less dependent on philanthropic giving and more on earned income as a measure of long-term viability. Start-ups are often rated by their likelihood of achieving disruptive scale.

Scale does matter: one needs look no further than the US embarrassment regarding COVID-19 testing. Literally millions of people have found it difficult to get tested – and when tested to get timely results. [Even though this is the political season, for this piece, I will exercise restraint in my opinions about why that is. I am sure any regular reader knows my feelings.] The inability to provide testing at scale has limited the ability of many in the USA to make safe and reasonable plans for their own behavior, and businesses, schools and communities have been handcuffed in knowing how or if to develop a new normal.

The same will be true when a genuine scientifically reliable vaccine or treatment becomes available. We will return to normal, whatever that will mean, only when they are available at scale.

Another example, about which the literature is overwhelming, is about food insecurity/hunger. In the USA, There is simply no functional alternative to SNAP funding to reach scale. [Perhaps a guaranteed income on which a family can really live would be an alternative but that requires major systemic re-thinking.] Food pantries, soup kitchens, and other local efforts are still indispensable, sadly, but none can systematically assure that the millions of families, children, undercompensated receive essential and basic sustenance.

We see this assumption in funders’ responses to innovation in both for-profit and not-for- profit sectors. On the for-profit side, a new idea doesn’t have to be as disruptive as an Uber or Lyft or Airbnb or any of the other disrupters to warrant initial or mezzanine funding; but to receive funding, it would have to have a credible business model which would bring it to self-sustainable scale in a reasonable time frame. There are capital markets at every stage of the process that make those risks viable, and there are even tax incentives to give those risks even a little extra push.

This is true on the social impact side of this as well. It is certainly acceptable and reasonable to achieve social good through for-profit investments. To take but one example: Once upon a time, support for solar energy fit neatly into the grantmaking side of a foundation’s portfolio, especially for a funder with a commitment to environmental sustainability. Today, such funding fits comfortably on the investment side since its financial viability and its positive impact are so clear to all but some recalcitrant deniers. [Full disclosure: we are personal investors in solar energy development projects both in the United States and Africa.]

It is far less easy on the not-for-profit side. Very, very few not-for-profits ever reach the stage where they can generate sufficient fees for service or endowment income to be fully self-sustaining without dependence on grants and charitable gifts. It is somewhat easy to get limited start up funds for an innovative project but the larger a new organization gets, the greater the dependence on more and larger gifts. There is a very limited identifiable capital market for mezzanine and second stage not-for-profit organizations. The problem is that all too often funders have drunk the venture capital or impact investing Kool-Aid. “Will you be the disrupter that addresses hunger or poverty or homelessness or illiteracy? [you know, the little things.] And if not those, will your new project be sufficiently compelling that it will reach the scale, scope, and sustainability justifying the aspirations of both funders and creators? It is a rare not-for-profit that can credibly claim that business model.

The last 6 months have challenged those assumptions of what success should mean. Organizations that had built their business model around fees-for -service or government reimbursables have suffered greatly. The higher the percentage of reliance on those income sources, the harder it has hit. Organizations that relied more heavily on traditional grants and contributions had more reliable income, even if more variable than in “typical” years.

Moreover, as funders have become more committed to responding to a radically changed reality, many of us have frontloaded our giving, reduced our reporting requirements, and eliminated our restrictions. [How permanent those changes remains an open question – but for another time.] Locally/placed based grantmaking has resurfaced as a high priority for many, especially to direct service organizations.

What is evident in these changes is that scale can no longer be the primary driver. Of course, there may well be organizations that can deliver more, better, faster, and more efficiently even on the local level, but that doesn’t guarantee that they can do so everywhere and to everyone. If there are racial inequities, food deserts, uneven economic prices to pay for the pandemic, efficiency only takes you so far. Community based organizations may know the needs of their communities, and especially of micro-communities, that larger, more efficient organizations don’t.

I would hope that this corrective represents a welcome rethinking regarding sustainability. There are circumstances when sustainability cannot ever be based on program generated or endowment income.

There are even circumstances when scale becomes a counterproductive criterion. Permit one very real example to suffice: When I was CEO of a foundation 20+ years ago, we were involved in numerous funding collaboratives. One was in support of a very wonderful innovative program for and by young adults. Its ambitions were aligned with its capacities; its commitment to quality a reflection of the thoughtfulness of the founders; and its success commensurate with both. One of the funding partners believed that this was such a wonderful model that it should be scaled up. They persuaded the rest of us to hire a consultant who specialized in this kind of non-profit scaling. Sure enough, you are not surprised to read that at the end of the consultant’s extensive analysis, they came back with a series of recommendations about how to bring this boutique organization to national scale. [I was on record as disagreeing, but was outvoted, and if one is in a collaborative funding arrangement, there are ground rules.] Shortly thereafter, a development staff was hired, a new executive was selected, and a national roll-out was initiated. A year later the organization went out of business.

What happened? When the organization was small, local, and controlled by those who were peers of the target market, it worked great. When those folks were essentially relegated to program staff but no longer making the big decisions, it didn’t. Why? Because once it attempted to reach scale, it became a competitor to much larger, much better capitalized organizations. The agility and responsiveness that made it successful on the local level became impossible to achieve on the national level. While I know that I am not giving readers too many details here, suffice it to say that it was a classic case of funder overreach and the idealization of scale as a goal. We were simply wrong, and a jewel of a program became worthless.

Let me return to where I began. Scale does matter in addressing systemic issues; in fact, it is a sine qua non. There are times when anything less is not enough. But implementation is almost always local. And how to implement often requires local knowledge that a big picture funder may not have. We don’t always solve our most pressing problems if we only look at financial sustainability, equate capacity with scale, or dismiss the value of local innovation. Our funding commitments must include the vulnerable, smaller, and local if we truly want to bring impact to all.


The Institute for Wise Philanthropy has been teaching and advising foundations, philanthropists, families, and philanthropy organizations around the United States and 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.

Interview with Beth Granger –

September 25th, 2020

Richard Marker

https://www.linkedin.com/posts/bethgranger_im-live-with-richard-marker-activity-6706954127156637696-G70T

#390 Listening vs. Hearing: The View from the Other Side

August 5th, 2020

Richard Marker

A couple of years ago, my accumulated professional careers crossed the half-century mark. Knowing that it has been an 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 piece emerges from one of them. Watch for additional posts that will address others.

…..
“Strategy” is the constant among my five careers. Whether in the non-profit or for-profit sectors, or, in the last quarter century in the philanthropy arena, being a strategist has been the core competence that ties it all together. I learned very early on that the elegance of a strategy, the completeness of the data, and the rigor of the process are often for naught if there is not attention to implementation. There is much to say about this, and I have written and taught about this extensively. But a current discussion in our field has underscored, once again, how crucial the implementation stage is in achieving any effective strategy. In this case – the difference between listening and hearing.

The anecdote: I recently had occasion to be reminded of a project I did fairly early in my career. In my first full-time post-graduate school position, I was a young associate chaplain/faculty at Brown University. Toward the end of my first year [’71-72], a graduating senior came to meet with me. He told me he had a beef: He said that there were matters of identity that he and his friends had never discussed and, now, on the eve of graduation, realized that he wishes they had. He told me that he thought that the only person he knew who could have facilitated that much needed conversation was me.

Now, to be fair, while it was a nice compliment, there were undoubtedly lots of folks who could have facilitated that conversation; his was probably more a comment on the still existing divide between faculty folks and students even in the early 70’s. It did challenge me, though, and I subsequently began a practice that I continued for my remaining years there. [I left in 1982.]

At the beginning of every Spring semester, I would invite graduating seniors to my home for small group teas. Over the years, I learned a lot. The most sustaining lesson was this: whatever perceptions I may have had about students’ commitments and involvements based on what I observed proved to be only coincidentally aligned with what students said about themselves. I might see a student doing some particular program or activity almost every day, yet those very students would describe themselves as only very marginally connected; other students might talk about how important a project was to their undergraduate life, even though he or she might be totally invisible to others involved.

In other words, self-perception is not always aligned with how others see us. The data alone was misleading – or at least insufficient. It was a lesson that has served me well in every subsequent career, but none more so than in my journey in the philanthropy sector over the last quarter century.

Our field is fraught with opportunities for misperception. It historically has been built on a power imbalance – one side wants, the other side has. Those who want financial resources need to convince those who give that they should give to them. Built in is a challenge of perceptions. Organizations that want resources from funders try to determine what the funder really wants to hear, what will give them a tactical advantage, what is legitimate hyperbole vs dubious exaggeration, and what will give a funder the confidence that their articulated missions will best be fulfilled in supporting your organizations. Funders have our own set of desiderata: yes we want to assess all of the items presented by those seeking our funds, but we also have our own independent considerations: where does this request fit within our own priority system, how does supporting this organization or project align with our own risk tolerance, how does this request compare to other similar requests on our docket, what is the internal push and pull among family or trustees or staff, and more.

Those requesting funds rarely know all of these internal considerations – meaning that there is an endemic disconnect. They are limited by their perceptions – extrapolating from the knowable [grantmaking history, articulated missions] to the “best guess.” Proposals, whether written or oral, all reflect a best guess of what the funder really wants, but since there are so many subjective factors, there is always, by definition, the unknowable.

Some funders have made our own mistakes – that of assuming that we can take the guess work out of our decision making. It is a little less true today than it was a few years ago, but for a while, funders thought that we could apply a rigorous due diligence and metric system to make the “right” decisions. That too is wrong – and also for an important endemic reality: we fund the future, and the future is never guaranteed. We may choose to reduce the risk by supporting only well-established organizations, or well-developed programs, or sector leading executives, but…. COVID-19 only proves that nothing is assured. Moreover, the lower the risk, the lower the likelihood that creative change can occur. If, as many funders claim, we want our money “to make a difference”, it is important to remember that “difference” has to mean something will be different.

If that is true, we too have an obligation to learn how to extrapolate beyond that which is presented. But how?

This is where our field is moving in a healthy direction. There have always been some in our sector who have made it safe for potential or existing grantees to tell the whole story in honest ways, but not most of us. There have always been some in our field who know that those on the ground are more likely to understand real needs, especially in the realm of direct service/at risk populations than we. There have always been funders who have an understanding that funding the future means that some things we fund will [and should] fail, but too many still don’t have the tolerance for failure or the importance to endorse its legitimacy.

Many of the most welcome changes in the current climate in our field are attempts to address exactly these things. Initiatives such as “Trust Based Philanthropy” or “Listen4Good” or “Nothing about us without us” or the ongoing work of CEP are all very welcome attempts to rebalance. How do we as funders make it safe for grantees to tell us honestly what they need? How do we make sure that the direct stakeholders are the real beneficiaries of our intended largesse? How do we allow grantees to take enough risks toward much needed change that some will assuredly fail? These, and numerous other initiatives are pushing us as funders toward redressing gaps in our own practice and affect. The primary responsibility in making these adjustments is ours.

It is also true that not every nonprofit is guiltless. All of us on the funder side have seen organizations that have chosen to hide essential information, to reject thoughtful support as inappropriate intrusion, to be blind to their own failures, and to view us funders as inscrutably “different than us.” We as funders may have the primary responsibility to readjust our behaviors but we are not alone in this. Non-profits too need to learn how to listen – to words that may appear patronizing or distanced or judgmental or overly jargon-y, often presented in settings that are intimidating but are usually well-meaning and more often than not intended to be constructive.

All of us, yes every single one of us, has filters that align what we are told with “our own” reality. The real challenge, then, is not only listening but also knowing how to hear. Since affect and tone and setting and implicit biases [on both sides] can so easily distort, knowing how and what to absorb from feedback and shared information is a constant challenge.

As we know from so many other contexts, collecting data may be hard; interpreting that data is much harder. Creating strategies may be daunting; implementing them is much more so. And, listening may be hard; hearing is much harder. For all of our benefit, it is a skill worth learning.

#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”.

#379 – Post COVID-19: The Future of Funder Education

May 20th, 2020

Richard Marker

Full disclosure: As discussed below, we have been educating philanthropists, families, and other funders in many settings and under many different sponsorships since 2000. Until now we have resisted suggestions to offer funder education courses or seminars directly through our Institute for Wise Philanthropy. For the first time, we are seriously contemplating offering limited-attendance on-line workshops. This post shares some of our thinking as we move ahead with our planning. To be clear: these webinar/workshops are not intended to supplant the superb funder education program at the University of Pennsylvania Center for High Impact Philanthropy with which we are delighted to be connected. However, that program is restricted to principals, trustees, or chief professional decision makers of grantmakng institutions. For all other funders, please keep in touch and watch for our offerings.

Between zooming and cooking, there is still a lot of time to write and think these days. Thank you to so many of you who have commented both publicly and privately on my numerous posts on various media regarding funders’ roles now and in the “next normal” period. There are many more pressing issues at this moment in time than how one educates those who give money, but it is how I have spent a good chunk of my professional life over the last 20 years so it shouldn’t be too surprising that it has been on my mind during the last couple of months.

To remind readers who may not be familiar: Since the foundation I was heading closed in 2002, I have chosen to spend a good deal of time responding to requests to offer workshops and courses for families, philanthropists, and foundations in many places around the world. Some of those have been at NYU and UPenn, some for associations and what are now called Philanthropy Support Organizations, and some for individual funders and foundations.

When I first started doing this in a formal way, not wanting to develop a top down curriculum, I consulted with the organizations most prevalent in our field at the time: the Council on Foundations, the Association of Small Foundations [now Exponent Philanthropy], the National Center for Family Philanthropy, and the Forum on Regional Grantmakers [now the United Philanthropy Forum.] The courses were then jointly conceptualized by what was then known as the New York Regional Association of Grantmakers [now PhilanthropyNY.]. I asked them all one simple question: “What should a funder know?”

There was so much alignment in their answers that it was relatively easy to create a curriculum based on consensus “core competencies” of grantmaking. As the world and our field have evolved over the years, the curriculum has been updated regularly, but the basic concepts and structure have remained viable and vital. I am proud to say that several thousand funders around the world have been direct beneficiaries of that model. Further, it significantly informed my own boutique “philanthropy advisory” model, and it is the underpinning of my quite extensive international speaking.

Until now.

1. Curriculum.
So much has been called into question over the last couple of months, it is forcing me to think about what philanthropy education for funders should look like in the “next normal.” Has this fine-tuned and well-tested curriculum become too dated for funders who have been rethinking strategies, changing ways of relating to their communities and grantees, accepting the overwhelming reality of the systemic disconnects and need for public advocacy, and even what it means for us to have independent and autonomous decision making about where our public benefit resources should be spent? Or, conversely, has all of this reinforced the value of such a structured, sequential, and carefully considered curriculum as a basis for knowing how to make the hard decisions with which we are all faced?

2. Medium:
A lesser but no less challenging question is what the optimal viable medium for this kind of education should now be. 100% of what I have done until now has been predicated on “in-person.” The occasional webinars I have presented have all been for groups where everyone knew each other and had prior in-person experiences. Group learning among funders with an educator in the room, is very different than a group of pictures on a screen with an active chat button. Philanthropy education for funders, built around the core competencies mentioned above, has been most credible when a funder hears the questions other funders are asking, what challenges they face, how they respond to the same sets of questions. And what about confidentiality? Funders want to talk in safe, discreet, and confidential spaces. [see #3b below]. Have we developed sufficient confidence in newer media that this discretion can comfortably migrate – or would it, ipso facto, be one of the inevitable losses that would accrue to accepting fully on-line courses?

3. Educators and Students:
Moreover, given emerging issues identified by such initiatives as “Participatory Budgeting”, “Trust Based Philanthropy”, DEI practices, etc., not only must we examine the content of the curriculum but also both who should be imparting knowledge and who should be in the room.

a. Who should teach:
On the whole, our field has relied on funders to teach funders. To be sure, not every funder is a good educator – something that anyone who has attended sessions at philanthropy conferences can attest. However, a good educator who is a funder with multiple experiences has a much deeper internal data base to respond to the realities of other funders. As our field has become more diverse and the relevant experiences and values are expanded, it raises the expectations of what the content should be and the challenges of determining who should provide it. This issue is probably the easier of the two challenges to address. After all, over the years, we have readily added issues of equity in both our philanthro-ethics and in our strategy units. And there is a long history of inviting co-presenters with a variety of backgrounds and expertise to be co-educators, many of whom reflected much of the now-current diversity lens.

b. Who should be in the room:
The question of whom we should invite/permit into the funder education room is far more complicated. All of us on the funder side are well aware of being “walking dollar signs.” There are few places we can enter without being solicited. Over the years of teaching funders, I am consistently asked to guarantee that no one hoping to raise or manage funds will be there, and every philanthropy conference requires a similar commitment from all attendees and speakers. Sadly, that concern is not ill-founded; I have seen it abused when the participation rules have been loosened or when someone simply cannot resist the temptation to sell to wealthy funders. Yet if we are now talking about developing a new relationship between funders and nonprofits, if we take seriously the “nothing about us without us” mantra, if we believe that our advocacy requires a full mutuality, is the implication that we need to develop a new model that removes the divide and invites funders and the npo/ngo side of the sector together? Or would the funder community consider that a step too far? Is there a way to have separate education for funders precede subsequent joint learning?

4. Systemic Change.

The final question has to do with the centrality of systemic change as a new primary essential core competence. We have always underscored that understanding the interconnection between public policy and private philanthropy is a sine qua non for contextualizing where our field is and where it has come from. Once aware, we have felt, it would be hard to make a grant, any grant, without thinking about what its relationship to existing or preferred public policy. Is it better to support that local food pantry or support advocacy for increased SNAP funding? Or both? Is it better to fund that in-school arts project or to advocate for the restoration of those funds? Or both? You understand.

But COVID-19 has laid bare the scope of systemic dysfunction that leads to food insecurity, fiscal uncertainty, health-care vulnerability, the fragility of our cultural institutions, and yes, instability of our civil liberties and civil society. It is one thing to make sure that funders know of the legitimacy of advocacy funding; that is something we have taught all along. Perhaps, though, we must now say that any philanthropy education that doesn’t start with the centrality of our role in addressing systemic questions is insufficient and doesn’t fully acknowledge our unique role.
….
There are a lot of changes that await us as we delicately and thoughtfully move into a “next normal.” Those changes do and will touch every part of our lives. If there has ever been a time when our philanthropy work matters, it is now. It matters best when that work is informed by a deep and profound understanding of what our roles should be and how we can best play those roles. We have endorsed that mandate for a long time. Looking at the “next normal,” it would be irresponsible for those of us who are philanthropy educators to avoid the serious discussion about what a funder should know now.

Especially now.

Dear reader: Your thoughts and reactions will certainly inform both our continuing work and our new offerings going forward. I urge you to share them with us and your colleagues.

#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.