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Posts from the ‘Philanthropy Trends’ Category

#368 Funding Arts and Culture During COVID-19

March 31st, 2020

Richard Marker

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

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

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

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

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

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

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

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

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

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

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

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

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

March 18th, 2020

Richard Marker

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

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

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

Among those lessons:

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

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

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

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

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

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

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

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

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

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

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

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

#333 – Medicare for All, Equity, and the Philanthropy Question

February 11th, 2019

Richard Marker

When I first started writing this article, it was intended to focus on how and why “Medicare for all” has become a screen for concepts of equity and fairness in the United States. Indeed, it has become an early metric for where on the Liberal/Progressive continuum Democratic 2020 candidates position themselves.

In an addendum below, I will address my thoughts on this question, but as I was writing them, I realized that my key issue has more to do with the gaping chasm between those few who have and the massive numbers of those who don’t.

Most readers, I am sure, recall the “Occupy Wall Street” movement of a few years ago. There were some tactical and strategic errors that their leadership made so the initiative fizzled. Yet, it did serve the purpose of changing the vocabulary of how we discuss the impact of public policy on matters of wealth accumulation. We became friendly with some of the key organizers and felt comfortable associating ourselves with the main thrust of their rhetoric. We are very far from underprivileged ourselves, but, as the chant went: “we are [among] the 99%”.

We were not the only ones in our position to join in the marches. I, for one, chose to wear my customary bow ties and bespoke suites since I wished to, semiotically, emphasize that this was about policy and policy includes all of us. Professionally and personally, we know many people who do fit into that 1% category and most [but far from all] of them readily acknowledged that there was inequity, injustice, and a disproportionate disparity between the very wealthy and everyone else. Many wealthy and super-wealthy people were more than willing to affirm, at least in private, that the protesters were correct, and they and other people of great wealth could easily double their own taxes and not feel a thing.

It appears, though, that their own lobbyists didn’t get the memos so when the tax sham was passed in the current administration, it only widened the divide. I haven’t done a survey myself, but I suspect that many of the same wealthy folks I spoke to in the Autumn of 2011 would privately give the same answers regarding equity and taxes. But now that we have an administration and cabinet led by those with extreme wealth, it appears that the special interests of the wealth class take precedence over everything else. That means a willingness to push to violate decades old contracts for social security and Medicare for the masses of people in order to preserve those tax reductions for the few.

History doesn’t look kindly at this vast a wealth divide and those who want to learn from history should look very carefully about whether our current inequities are sustainable.

I for one feel that the only way to preempt some of those cataclysmic possibilities is through a change in public policy toward taxation. [Just as Medicare for all has become a metric in the political discourse, so has the issue of whether wealth above a certain level needs to be taxed at substantially more progressive rates. [None, we should note, are arguing for the rates that existed during the Eisenhower years.]

When I have publicly articulated these advocacy positions in some circles, one of the predictable objections is that I am advocating a redistribution of wealth. They are quite correct – but after all, I rebut, how to explain the growing wealth divide except by a legal wealth redistribution in the other direction. Rhetoric aside, all some of us want is to redistribute societal resources to a more equitable balance. Some of us think it is simply unacceptable for hunger, illiteracy, poverty, to exist because of policies that reward “wealth beyond the dreams of avarice.”

We in the philanthropy world are in a sensitive place in this conversation. After all, much of the best-known philanthropy exists because of the decision by those who have accumulated more than they think they will ever need to have some of their personal resources transferred to public good. But even though the resources are transferred, a huge amount of control remains, the power imbalance is sustained, and, if done without sensitivity, becomes just another display of privilege.

It is my view that philanthropy should always understand our role vis a vis public policy. We alone cannot eradicate systemic social ills. Our analysis of the best use of our financial and other resources should always include a determination of what each sector can and should do more effectively. I cannot imagine anyone believes that private voluntary philanthropy is equipped to eradicate hunger, illiteracy, homelessness, disease, and public safety on our own. We may have a role – there is legitimate debate about how extensive that role should be – but none can seriously believe that we have the capacity to solve the problems on our own.

That does mean that addressing public policies and social weal, including about taxes is essential to what we are about. As unique and distinctive as our sector may be, it may not, must not, exempt itself from addressing the inequity that tax policy fosters.

Of course, that will have an impact on our foundations, and our own wealth accumulation. It is a fair price to pay to correct for the radical, systemic, but fully legal inequity that has only become much worse since the Occupy Movement chanted and marched.

In many ways, our philanthropy sector is ideally suited to take the lead on this. Since we are identified with the privileged class [even though only few of us are at the rarified mega level], our voices carry a moral suasion to policy makers, and affirmation to those in need and at risk. We know that our legal and moral legitimacy mandates our commitment to public good.

We must affirm that there are profound risks to the stability and future of our nation if we don’t.

Addendum: Some thoughts on “Medicare for all”

On the surface, this should be a no-brainer:

1. The USA is the only first or second world nation with no societal commitment to provide health care to all of its citizens as a matter of right and justice [and practicality].

2. Any insurance plan is more financially viable when it includes low risk as well as higher risk. Medicare is expensive now because it is restricted to the highest user population. It would assuredly be more affordable for all if it included all.

3. Many people misperceive that Medicare is a gift offered by a benevolent Congress. In fact, all of us have paid for it from the day we first earn a pay check. To date, it has been a contract where the payback is only offered to seniors and certain others.

4. Medicare for all is NOT the same as a government run health system. Quite the contrary, we choose our own plans and physicians, with Medicare being the insurance of first claim. It is a total [and often willful] misrepresentation when anyone decries government run health care as the same as a single payer insurance program.

5. If the money individuals and companies now pay for private insurance were added to the mix, it is highly likely that the gross cost of medical insurance would drop. [I will trust folks at places like the Peter Peterson Foundation to crunch the numbers.]

6. It will eliminate the uninsured, a major drain on health care institutions. One way or another, those costs are rolled into the fee determinations we now pay. If there are no uninsured, there will be lower costs for all of us.

7. Most Medicare recipients also purchase supplementary insurance plans though the private insurance market. There shouldn’t be any reason that that cannot continue as an option..
There are legitimate concerns

8. Even if the long-term costs will prove to be lower, there will be transition costs. While I believe those transition costs will be temporary, I am not naïve to the fact that they will exist.

9. An entire insurance industry will need to be restructured and, from a political perspective, that won’t be simple even if the larger public policy benefit is clear.

10. For many employees, health care insurance is covered by employers. [Those coverages are far stingier than they used to be.] That shouldn’t be a long-term issue since it simply would require employers to redirect their payments to payroll taxes from private insurers, but, as in 9, it will require a comprehensive transition.

As I see it, this is pretty straightforward. Why do we hear that it is too radical, un-American, or too expensive?

For some, any increase in government involvement in anything is anathema. It doesn’t matter whether it is financially beneficial or more humane – they simply don’t believe in the active role of government. To those folks, there isn’t much I can say since those ideologues have their minds made up.

For some, there is fear of change even when they acknowledge that profound inequities exist in our current system. To those we need to provide quick wins and a commitment to as little bureaucratic log jamming as possible.

For some, there is still a widely held perception that, for all of its faults, the current US system is superior to others. Sadly, the data doesn’t demonstrate that now, even if it ever was true,, but we need to find ways to show individuals that their own access to health care will be easier and less expensive than what they currently have.

And if any have doubts, all they need to do is ask those of us who are currently beneficiaries of Medicare what we think. Millions would be thrilled if they could have it too.

#332 – Values Based and Impact Investing: Who is leading the way in the Philanthropy Sector

February 7th, 2019

Richard Marker

In a recent front-page story in the Chronicle of Philanthropy [“Doing Well and Doing Good”, 8 January 2019], Marc Gunther reported on an in-depth analysis about how many of the largest foundations are or are not using “impact investing” as a significant part of their investment strategy.

Not so surprisingly, he found a wide variation, although somewhat more surprisingly, he found that some of the foundations most outspoken about certain issues such as the environment and social justice do not apply impact or social value investment strategies on their investment side. Of course, some do, and many others have made their long-term intentions to do more quite clear.

In this post, I would like to add a bit of nuance and a different bottom line about where the philanthropy field is at this time.

Exactly what “impact investing” is has inspired a good deal of debate. Is it the same as “values based” investing? To illustrate how complex this question is, permit one very personal example: When I mentioned our personal investments in a company developing solar fields in Africa to a prominent expert in the impact investment field, one who takes a fairly purist view of the term, s/he needed to be convinced that what we did was a true “impact investment.” Our decision was based on an attempt to apply a series of values screens and a conviction that the ability to use renewables rather than fossil fuels would allow these nations to leapfrog a dated and destructive infrastructure. The social and environmental intervention persuaded us, and the “financials” persuaded our advisors. However, the above mentioned expert said that until there was a deeper analysis of the underlying impact and metrics, it was not yet a proven “impact investment.” S/he did not say it was a bad thing to do, only that it might not rise to the level of a true impact investment.

Therein lies a tale – but first let’s go back a decade or two.

Philanthropists and foundation trustees used to [forgive this gross generalization] accept an iron clad wall between the investment side and the philanthropic spending side. A few outspoken outliers used the shareholder activist tool to challenge tobacco companies, resource sourcing, and a few other values screens, but they were the exceptions.

A very few even challenged personnel practices internal to those companies or in the companies that were providing services or resources. Mostly, though, the practice was pretty consistent: trustees followed the leads of their investment managers – “our job is to make the maximum amount of money so that you can spend your money toward social good.” Indeed, in those days, investment managers were quite convinced that values-based investing, no matter what screen you chose, required that a funder accept concessionary returns – i.e., trade off income for values.

A series of convergent factors began to challenge that: some of it was coming from idealistic b-school students and graduates who believed that doing well by doing good should be a realistic aspiration. [Elsewhere, I have challenged the conviction that only for-profit solutions can solve social needs.]

The second major challenge to the traditional divide came from within the philanthropy world itself. Many began to ask about why only 5 cents on every foundation dollar were going to social good and 95 cents ignored it. That doesn’t seem right, especially when it could be shown that the investment and the program teams were functionally cancelling each other out, and the legal enabling of a foundation or donor advised fund requires that it be for social good.

Therefore, values-based investing emerged as a logical vehicle. It served the larger interests of those who wanted to feel good about their financial aspirations and allowed a rethinking for philanthropy folks to see if there might not be a better alignment.

Unlike Marc Gunther’ well documented piece, these next sets of comments are not based on structured research, but I have been in the field for a long time and am invited to speak and participate in both impact investment conferences and philanthropy gatherings on a regular basis. So, while the next set of generalizations may not be scientific, they are more than a random collection of anecdotes.

Whether or not one views them as synonyms, my observation is that “impact investing” and “values-based investing” are now mainstream. Being mainstream does not mean that everyone does it, but it has become part of the consciousness and planning of many philanthropists and investors. Indeed, while a decade ago, at investment conferences. impact investing was an outlier topic reserved for the “soft” session on philanthropy, the legitimacy of which was frequently challenged by wealth managers. Today, entire conferences talk about many investment opportunities independent of any philanthropic motivations, and values-based investing is integrated into most of those same conferences. There is now plenty of evidence that, when done with the same diligence as any other investment, there is no need to view the returns as “concessionary” and the market opportunities are growing.

Among many smaller and medium sized foundations, the alignment questions are very real and may even be easier to implement than for larger ones. How much or what percentage or what values or which methods are the best are all topics of active debate, but rarely are they not on the table. Often any resistance is not with the funder but with an outside investment manager for whom this still doesn’t compute with longstanding planning orthodoxies.

If my observations regarding the field of non-mega givers is in any way accurate, it reflects more of a sea change than was suggested by the findings reported in the recent Chronicle article. Why might that be?

Every society has had royalty or aristocrats or oligarchs whose wealth was massive, and whose philanthropy was very visible. That was true before modern times, and in virtually every society today. However, what often defines the more authentic philanthropic character of a society is the behavior of those who are successful but not so that their lives are fully removed from those who are not wealthy. The more authentic story of philanthropy always has been about the merely rich or the not quite so wealthy more than the mega. [I write this at the conclusion of the recent government lock-out in the USA. If one wants to understand the difference of world view, listen to the tone-deaf comments of the super wealthy in the administration regarding how people should be able to deal with the sudden deprivation of a pay check.]

To return to a very personal perspective, it is admittedly not so easy to be fully values based invested. There are many new “social” mutual funds, but upon close examination, they have a lot of overlap. Even for not-so-deep pocketed investors such as we who are committed to move fully into the values space, it isn’t so easy to develop a proper investment strategy.

If one has huge amounts of money that must be invested, it is not so simple to consistently apply values screens. Even many of the largest polluters have invested heavily in alternative energy solutions. Alternative and direct investments of all sorts matter, but they usually require more intensive due diligence. To be sure, the mega funds have more resources for that due diligence, but even with that, a good deal of money finds its way into traditional investment vehicles.

However, the reason I think that a deeper dive into the philanthropy field would find more active engagement than reported in the article is that with less money come more low-cap or local options. Or more to the point, there is less need to have philanthropy funds invested in the large-cap type stocks and funds. A more modest, even if well-heeled, funder can engage in local affordable housing or career changing projects, or alternative energy solutions that are too small for the fund managers of the mega funders to consider. Shallow pocketed funders can choose to put funds into one or more of the growing number of values defined mutual funds. They can extend loans to local non-profits to cover cash flow or growth strategies or government shutdowns because they have the relationships that allow both good due diligence and hands on local knowledge.

This does not mean that every funder with more limited means is using our resources with a values screen [nor, for that matter, am I suggesting that mega funders aren’t] – only that it is easier for those funders to choose to do so, and, to the point raised by the Chronicle, to have those investments be a larger portion of one’s investment portfolios.

Not that many months ago, the largest investment company in the world, Black Rock, announced that it was now applying an ESG [Environment/Social impact/Governance] screen to all of their investments. Their conviction is that, over time, it is not only the right thing to do ethically but also will yield superior investment returns. Many now argue that values based/impact investments will soon be the norm and those categories will be as central to investment strategies as financial due diligence. When that happens, the mega foundations will be right there.

Until then, though, it may well be that many more modest funders and investors are leading the way.

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

January 22nd, 2019

Richard Marker

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

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

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

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

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

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

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

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

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

B. Outsourcing:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

281 Why our Field Requires a Professional Credential; It is Long Overdue

June 7th, 2017

Richard Marker

This plea is not new. I have been pleading for our field to develop a professional credential for 15 years. It is time to make this plea once again.

I do so now without the risk of a perception of a conflict of interest. Previously, I know that some readers thought that I was simply hawking the NYU grantmaking certificate program in which I was a part time faculty member. However, while NYU still offers a limited number of funder education courses for foundation professionals, last year it discontinued all of its certificate programs. Similarly, I teach part time in the University of Pennsylvania’s CHIP funder executive education program, an outstanding offering primarily for principals, trustees, and foundation CEO’s. CHIP hopes to institute a high-end certificate in the future, but not yet – so in this brief window, I hope my urging won’t be dismissed as self-serving.

The request is built on a simple premise. Foundation professionals and philanthropy advisors have no professional barrier to entry – other than being hired – and that is simply wrong.

It is a bit shocking: we are responsible for making or advising decisions worth billions of dollars every year. Our cumulative decisions influence an entire sector. Our voices can have profound impact on public policy. Yet all that is necessary for us to do that is to get hired.

That is not to say that none are well equipped to do the work that we do. Quite a few are. Some are hired because of distinctive content expertise. Some are hired because they know the principals. Some are hired because they interview well. Some are hired because they are in the right place at the right time. All of these are good and representative reasons why people get hired.

But none are required to demonstrate that they have a certification or credential or a license or a degree in the grantmaking field. It is exceedingly rare that a newly employed professional is expected to fill that lacuna as a condition of employment.

Fundraisers are expected to have credentials and in some States to be registered. Lawyers, doctors, wealth advisors, psychologists, teachers, even barbers are required to get a credential – and in most cases to demonstrate that they have earned continuing education credits annually. But not foundation professionals or philanthropy advisors.

The tradition of self-authentication in our field is hardly new. When I entered the field, one regularly heard “if you’ve met one foundation, you’ve met one foundation.” There was a certain legitimacy to that description at the time: the field was far less developed than it is today; it was comprised of a much smaller number of professionals; interest in philanthropy education and articulation of best practices was still years away. Most important, foundations typically reflected the “culture” of the founder or primary funders. That doesn’t mean that they were correct in dismissing standards and credentials, only that we can understand why.

Less defensible was the more recent response of the founder of an organization of consultants and advisors in our field when I informed her that their members were eligible for a discount at the then thriving NYU Academy for Funder Education. Her exact words were “why would our members need courses? They already have clients.” I hope that I need not explain to readers why I was flabbergasted by that comment. No doubt, many of their members are well educated as well as busy, and bring very respectable, if not credentialed, knowledge to their work. But I know many of their members and, sadly, more than a few could sorely use the education a credential would represent. One would hope that the current leaders of that organization are more sympathetic to the need for an educated membership.

In 2002, when NYU gave me the pro-bono go-ahead to help conceptualize what a certificate curriculum for funders should look like, I consulted with the Council on Foundations, the National Center for Family Philanthropy, the Forum of Regional Associations, and what was then known as the Association of Small Foundations. That curriculum has served the field well for over 15 years, taught upwards of 2000 funders from 26 nations, and did produce a professional level certificate, but that certificate was neither well known, nor widely adopted. In retrospect, it needed not only the conceptualizing partnerships and the co-teaching of courses of those four organizations, but also a broader buy-in and mutual ownership. This is a call to start over.

Realistically, there are two pre-conditions to a widely-recognized credential in grantmaking:

1. Employers of professionals in the grantmaking arena would need to respect its value. It need not be a pre-requisite for employment, but a foundation or advisory firm might require that professionals earn the credential within their first 5 years.
2. There would have to be a consensus in the field about what a professional certification would mean. Today, lots of organizations give “certificates” but there is no standard. One can receive a certificate after attending a luncheon, a one-day course, a three-day course, a one-week course, or, as was the case with the defunct NYU Academy, the equivalent of 2+ weeks of course work.

In order to move this ahead, I would urge a convening of those of us interested in developing certification standards, and would be happy to play as active a role as would be helpful. My vision of the curriculum and standards for our field may not be what other foundations and other professionals ultimately decide upon. But without a commitment to compliance it will never be adopted nor taken seriously.

Or, someday, it might be imposed upon us by those with less knowledge of or commitment to our field.

It is time.

What Motivates Giving – the funder’s perspective

February 13th, 2008

Richard Marker

This posting is in response to Jason Dick who asks: “What motivates giving?” Is it compassion, good fundraising, desire to make a difference in the community? What is it?”

Context: I advise and counsel foundations and individual philanthropists on the strategies which inform their philanthropy. My work is strictly on the side of the “givers.” That perspective informs these thoughts. Therefore,

Easy answer: it depends.

Harder answer: on what?
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