Posts from the ‘Role of Philanthropy’ Category
March 31st, 2020
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.
March 22nd, 2020
This is a follow up to #365 which reinforces the extraordinary work our philanthropy colleagues are enabling at this profoundly overwhelming moment in history. This post challenges our field, with the benefit of perspective afforded to few other sectors, to consider how we help rebuild our world going forward.
We are far from the end of this thing. We certainly don’t know how long our lives will be disrupted, how long we will be living in physical isolation and virtual connection, how high the mortality numbers will be, how deep and far reaching the inevitable recession will be, how permanently our lives will have been changed in every way.
We do know that there will be an end to the pandemic. And as happens at the end of every tragedy, crisis, disaster, things will never be quite the same. Thus, it is not too early to begin thinking about what those changes might be, can be and mustn’t be allowed to be.
Let’s start with the most sobering: we have begun to see the surge of problematic behaviors. In the USA, gun purchases and anti-Asian racist incidents have surged. Elsewhere in the world, domestic violence has begun to rise after an all too belated but welcome reduction in recent years. Nativism is a destructive political force in many countries. Limitations on civil society in many more.
Of particular concern in the USA is the growth of antinomianism and very deep cynicism toward any articulation of truth. Is it a surprise that teenage college students disregard alerts about COVID19 as irrelevant to them when they have come of age hearing that news and facts, even scientific ones, are “fake”? Is it a surprise that people selfishly hoard when they see that our government has dismantled the agencies charged with planning for crises such as this?
It didn’t take COVID 19 to see this deep-seated distrust. To take but one example: I have been a bit involved in the local funders’ Census2020 efforts. Let’s not forget that the census determines our representation and allocation of federal resources for the next 10 years. If any groups have a lot at stake it is the historically undercounted: immigrants, Latinos, African Americans, the poor, etc. Funders nationally have recognized the need to address these inequities by working toward a “complete count.” Yet in session after session, it was clear that those communities have no trust that their anonymity will be assured; that it isn’t simply another way for ICE to find ways to their front doors; that there won’t be manipulation of the results to further assure their long term disempowerment. Even when the head of the US Census Bureau tried to say that the Constitution guaranteed their anonymity, they didn’t trust that the current administration had any respect for those guarantees.
There are many more examples one can give about the erosion of civil society here in the USA, and many more that transcend political boundaries. Suffice it to say that, once we begin to see beyond the current pandemic [may that happen soon!], we will have a lot of rebuilding to do. Below are some systemic issues that we in the philanthropy world need to take seriously and in which we should assume leadership.
1. The fiction that any nation can be isolated from what is happening elsewhere in the world. One can close borders, erect artificial fences, but nature and economics seem to have a way of disrespecting any of those human-constructed boundaries. Therefore, first and foremost, let’s commit ourselves to insisting that public policy needs to take climate change seriously in any infusion of massive dollars into the economic system. The current pandemic should be a wake-up call to the impact on the world as our human-made destruction continues apace.
If one needs a proof text, all one needs to do is to see how quickly the air has cleared in Italy and China. Just imagine if we required that appropriate environmental policies were made permanent – using currently existing technology. We are beyond preserving everything, but such a massive environmental mobilization would go a long way to sustain much more of the world than predicted only a couple of months ago.
No, I am not advocating permanent social/physical isolation. I am advocating that, in the USA, we restore protections that have been removed in just the last 3 years, that we infuse as much of these newly approved billions into public transportation such as buses, trains, light rail – and not just for airlines. I trust that it need not be added that there is no need for our tax dollars to continue to subsidize fossil fuels. None.
2. Systemic Economic Adjustments: The divide between the rich and the not rich has become so severe that it has become as extreme as almost any society in history. And while it is true that the very rich have lost a lot of money over the last couple of weeks, let’s not pretend that they will be forced to sacrifice their lifestyles. Those same percentage drops in retirement funds will, though, make retirement a far more vulnerable reality for the vast majority.
If we do care about revitalizing the economy, let’s resist strongly 2 myths that have been consistently disproven except by extremist ideologues – both are implicitly immoral: that public support makes people lazy, and that trickle-down economics works. Enough has been written about this over the years by those more expert than me that I will simply refer readers to readily available documentation. But there are still those who believe it – or at least espouse it. There were Senators who refused to support the first bailout on the basis of creating dependence by the most at-risk members of our society. Shame on them!
3. Equity as the basis of public policy. Where to begin?
a. Minimum wage positions disproportionately are held by those of color, those from certain minority communities. Recent studies, long before COVID 19, have proven that, despite our national myth to the contrary, pulling oneself up by one’s bootstraps has become far more difficult in the USA than in many other countries. This is reinforced by…
b. Racism, xenophobia, anti-Semitism, Islamophobia, nativism, misogyny, gender bias – long standing cancers on the national ethos that have surfaced in more pronounced and dangerous ways than in 2 generations.
c. The absence of a meaningful safety net. The USA has always had one of the most porous safety net systems in the developed world. Over the last few year, exacerbated by this administration, those gaps have become every larger.
d. The US Medical System – if one can call it that – has been exposed. Surely, those with the means have been able to access the highest level of medical care in the world. For many others, to access care is a major personal sacrifice -and there is no guarantee of its quality. And for far too many others, basic medical care is a luxury beyond their means. The Pandemic, though, has shown that the absence of any system, any planning, and any underlying societal commitment. The ACA, an all too modest attempt to address this reality has been substantially dismantled. [For those who still choose to believe that the US is anywhere near the top of the world’s heap in this only need look at comparative infant mortality rates, the dropping of longevity compared to other nations, and the numbers of health related bankruptcies – unheard of elsewhere.]
I have previously advocated, only a bit sarcastically, that our national standard should be whatever congress provides for itself, but beyond that I have no commitment to any of the catchphrases. It should be clear to everyone, I hope, that anything less than a guarantee of medical care for all would be unconscionable after this episode.
4. Underlying all of this is a challenge to what a commitment to civil society, based on constitutional rights, means.
a. Education: It is shocking how uneducated our population has become. Once upon a time, the USA’s education system was a model to the world; today it is an embarrassment of illiteracy. Once upon a time, civil education was a core competence of our educational system; today most high school graduates would be hard pressed to articulate the rights guaranteed by the first 10 Amendments to the US Constitution. Once upon a time, substantive educational accomplishment was considered a sine qua non to financial security; today…
It cannot be overstated that we need to undertake a massive commitment to the value to an educated populace. And, indeed, massive is the right word since only a literate and informed citizenry can make decisions faced with purposeful disinformation, the mockery of science, the disregard of the responsible institutions of government, and more. At a time when information has become anarchized through the web, an educational system that addresses these new challenges is a mandate as never before.
b. Civil Discourse: It would be easy, and certainly not incorrect, to place much of the blame for the erosion of civil discourse and safe public spaces in the lap of the current occupant of the POTUS. If we are honest, though, it didn’t start with him or even in the last election cycle. And even when there will be a change in the person who sits in that seat, that will not suffice to begin to fix this. What is now considered acceptable in public settings was considered an embarrassment only a few years ago; the empowerment of xenophobic voices and concomitant hate crimes pushes us to the edge of the elasticity of what it means to be a part of a shared national community.
I am far from the first, nor will I be the last, to make these observations. Much has already been written and spoken about the dilemma and proposed paths forward to repair these deep wounds. But if it is true that we now have a moment when we will be called upon to rebuild our world, our national understanding, a restoration of a concept of civility, civil discourse, and the public square are indispensable.
We are about to be in the unique position of being called upon to rebuild our world – in many ways. History has taught us that there is no guarantee that such moments do not always bring out the best in people or their polity. We in the philanthropy world need to consider how we build all of this into our advocacy and in our funding so that we provide leadership to a rebuilding world that emphasizes values, understanding, knowledge and civility as core competencies that infuse every aspect of the way we live our lives.
It is a daunting mandate. We should do no less.
November 4th, 2019
Reader alert: This post, as in #354, has a very clear political point of view, at least at the beginning. You may wish to read #354 prior to this one.
This piece is difficult to write since I have so much disregard and antipathy for the current administration. An article advocating a crucial role for government, as this one will, must therefore take a leap of faith that some sense of normalcy and affirmation of civil society will return to the United States in due course. So, onward….
Since the Reagan years, politicians have been running on the concept that taxes are bad, and that government shouldn’t be expected to provide for its citizens. [except of course for their own very generous benefits!] Many others, especially in the private, for-profit sector, argue that the profit motive will almost always prove a more reliable incentive than altruism and will do so far more efficiently than the government can.
Well, it is not hyperbole that we as a society are paying a huge price for these years of cutbacks. Students haven’t been taught about the Constitution and rank well below the top 10 countries in tested learning; frighteningly large segments of the society believe that science, including on climate change, is merely political opinion; homelessness is on the rise throughout the country; the US healthcare system – yes that famous private system – is the most expensive in the world with far too many inadequately insured, and there are still those who believe it should be exclusively a private responsibility…. And it isn’t getting better.
As a quondam educator about the history of American philanthropy, I would be the first to acknowledge that the issue of who should have responsibility for what is as old as the US, and people can have legitimately differing opinions about which sector should be accountable for which parts. And there is a long and legitimate tradition of those in our philanthropy sector who will affirm that private philanthropy’s value added is that it need not be bureaucratically handcuffed, that it can respond to needs without political interference or a plebiscite, and it can take risks that government cannot and should not take. The idea of private philanthropy as society’s risk capital is a continuing and honorable theme.
There is certainly validity to those arguments – as far as they go. They fail, in my opinion, when they make two derivative arguments: that in the absence of government funding, private philanthropy should fill in the gaps, and that private philanthropy has the capacity to do so.
It is hard to overstate how the latter arguments are flawed. There are many “proof texts”: The largest private foundation in the world has an endowment of about $50B with a grantmaking budget of about $5-6B; compare that with the budget of the NIH – itself having suffered cutbacks over the years: as of this year, its annual budget is over $30B.
Or to put it another way, if those in the congress who wish to cut SNAP funding – the most important public initiative to reduce food insecurity – were to have their way, the amount of cutbacks alone would be greater than the sum of the endowments of all US foundations. Examples abound.
Or to put it another way, a private sector company worth $50B would be so far down the list that it would only be the 110th largest company in terms of value. And very few of the other top foundations would crack the Fortune 500 list. Imagine the naivete in thinking that this sector can have the resources to solve society’s systemic challenges alone or replace government funding.
It is true that foundation funding trails individual giving, so the true capacity of private philanthropy may be greater than this. But, even so, nowhere near the need.
But even if it could, the real question is: should it? After all, the very nature of private philanthropy is that it is not accountable to a plebiscite and that it has no obligation to respond to all of society’s needs even when not popular. There is nothing, other than good will, that would guarantee that the highest risk populations are not forgotten, or that there would be socially responsible standards for health, education, and more. If history is any indication, many of the wealthiest are perfectly happy to give their largest gifts to the most secure and prestigious organizations, universities, museums, and hospitals – and to underfund others. [Yes, I know these are gross generalizations and this giving is under severe attack in some circles, but the long-term numbers bear out the generalizations.]
Do we really want a society where retirement funds are fully subject to our own private investment acumen? That our health care depends on how much we can manage to pay and too bad for us if we cannot? That educational institutions only offer art or athletics or specialized attention if they are in wealthy neighborhoods?… In a country with 350 million residents, such a financially driven system of human services and health care and education is morally suspect and of dubious efficacy.
What about our role, then? We do have an obligation to fund that which government is not yet willing to do such as take risks, advocate for systemic solutions, utilize our unique vantage of not being subject to quarterly reports or biennial election to fund over time and with limited political overhang. We have the ability to bridge sectors, to develop new models, to leverage our resources even if they are more limited than many assume, and to be a moral voice of values.
Not all of us will agree on how to use our resources, for what we should advocate, who should be allowed to decide, and what the ultimate role of government will be in all of this. But we, more than any other sector, should be able to model those dialectics in ways that ennoble our society, despite or because of our disagreements – quite the opposite of the denigrating cesspool that surrounds the current administration.
Government funding alone won’t solve the morass we are in but honoring the legitimacy of taxes is a start. And, let’s be honest, if our sector doesn’t acknowledge our ability to help influence those policies, policies that reinforce why we exist and what we can do, then we are only playing into the hands of those who would either trivialize our role, or worse, magnify it beyond comprehension or credibility. Either way, we, and society as a whole, will be much the worse for it.
September 11th, 2019
It was 3 years ago when a group of funders and advocacy groups announced the Participatory Grantmaking Initiative. It was founded on a key underlying philanthro-ethical principle – now cleverly articulated in the pithy statement: “Nothing about us without us.”
The initiative reminded funders that our power can distort our perceptions of what real needs are and our judgment about allocation of our funds. Underneath our careful diligence we are susceptible to the very same predispositions and biases as anyone else. If those most directly impacted, or at least those responsible for implementing our initiatives, are not involved in the decisions, how can we be sure that we are acting responsibly or equitably?
As our field has finally recognized, our race and ethnicity [and to a slightly lesser extent, our gender] does not always reflect those we are serving or funding. [By coincidence, this was written but not published before a recent Chronicle of Philanthropy article underscoring this point.] And, unless we are funding elite schools and museums, it is certainly true that our economic status is far removed from the at-risk or at-need populations we aim to serve. It is surely a no-brainer that there are perspectives that need to be in the room and a long overdue corrective to the all too pervasive top down process.
But whose room, what roles, which decisions are far from clear. Should or must decision making extend to the board room? Do potential grantees have a disqualifying conflict of interest if they are also decision makers? [Recusal is an obvious technical answer, but we know that if one is a decision maker, even if one doesn’t vote, her/his presence is there.] And, bottom line, empowerment aside, how do we know that who is in the room actually guarantees greater impact? Therein lies the challenge.
These are difficult questions to ask these days for several reasons:
1. At a time when all questions, yes even in our field, are viewed as political, even asking this question runs the risk of implying that I am opposed to “participatory grantmaking.” So, let me set my record straight: I have been on boards which used variations of this form of grantmaking for a long time – long before the phrase became popular. Unquestionably we did better grantmaking because of having on the ground experts in the room. No question. Moreover, as a philanthro-ethicist, I suspect that several thousand funders who have taken courses or workshops with me can attest that I have been a long-time advocate that there need to be many means of countering the power imbalances intrinsic to our field – sharing decision-making is only one.
2. A more practical challenge is determining which stakeholders should be invited into the room. We have learned from program evaluators that determining which stakeholders need to be heard is often the most challenging part of any evaluation process. If that is hard for professional evaluators, consider the challenge to foundations and other funders who want to do the right thing and include the best informants but have limited resources and time to do that research. How do they avoid the challenges that they may have cherry picked their favorites or overlooked an important group?
3. A more far reaching question is what impact matters. Often in the most intractable systemic issues, funders can have perspectives that local service deliverers cannot have. That doesn’t mean that the service deliverers are wrong – but many of them have demanding claims on their time and resources that don’t allow or justify long term thinking. How one balances those two competing claims is not easy, and the impact measures themselves may compete. At the very least, it should force us to determine which interventions are most in line with our competencies and goals, and at the same time encourage us to help think through how the other needs can best be met.
For example, there is no systemic or societal issue that can be solved by a single intervention or funding approach. There are urgent needs for immediate responses to those who are ill or homeless or hungry or displaced. At the same time, all of those require a responsive public policy that helps ameliorate the underlying issues that a short-term intervention cannot. Funders with a commitment to address systemic issues know that advocacy and inter-sector collaborations are indispensable. It is perfectly reasonable to choose which approach is best for any individual funder, but we are not exempt for doing so with an alignment with those who are addressing the needs we cannot.
Impact measures – and which stakeholders should participate in these decisions – depend very much on where one fits on the continuum.
4. Underneath all of this is the question of the larger role of independent voluntary philanthropy in an open society. If, as many argue with a good deal of historic legitimacy, it is to fill in the gaping gaps that government chooses not to fund, then there is no question that there should be a mandate to engage as many stakeholders as possible in decision making. But if, as many others have argued, private philanthropy is society’s risk capital, not subject to plebiscite or opinion polls, then one might argue that it needs to be as free as possible to take those risks and stakeholders should be informants but not have a veto on funding choices. Of course, those decisions should be done in responsible, ethical, informed, and humble ways, but to take those risks is precisely the unique role that no other institution can play.
To return to the key point: our field, created out of privilege, has a lot to answer for. Whether intentionally or not, we have a long history of not treating our potential grantees as we should and knowing how to understand real needs and equity in making our decisions. Participatory Grantmaking is surely one of the correctives we should make to is to bring stakeholders into the funding process. As we see, even with the best of intentions, that approach is often easier articulated than implemented.
August 8th, 2019
If one reads some mailings from our field, from some of our grantees, and from all too many wealth advisors, one might think that philanthropy was and is a byproduct of the US tax system. It wasn’t and isn’t.
It is not even an American invention, as any scholar of religion or ancient history or anthropology can attest. There is no known society that hasn’t had some form of philanthropy or charity or voluntarism, and, for hundreds of years, much of this has been done in structured ways.
But it is true that in America there has been a long-time fascination with the giving history, practices, ethics, and lifestyles of the very wealthy. Their names and the recipients of their largesse with which their names are associated are the stories of legend and fascination. The quirks and foibles and philanthropic aspirations of the Astors or Carnegies or Rockefellers or Fricks or Rosenwalds – or more recently of the Gates or Buffets or Helmsleys or Adelsons or Kochs or Schwartzman or Bloomberg or the Chen Zuckerbergs captivate the attention of many of the remaining 99.5% of society. Their large gifts inspire admiration or anger or jealousy or awe – sometimes all at once.
If one isn’t careful, one may think that these stories are the story of philanthropy in America. But they aren’t. Or to put it more accurately, they are not the most important stories in American philanthropy.
After all, there have always been superrich – royalty, aristocracy, nobility, landed gentry – who controlled resources and people’s lives. One can cross the ponds on either of our shores to see that. [Let me be clear that I am not a fan of the unconscionable divide between the ultra-high net worth beneficiaries of an unjust system that we have in the USA, only that such wealthy people have existed in many places for a long time.] Indeed, what distinguishes American philanthropy is the willingness of the average person to give of his or her own means. The institutions of philanthropy, on the whole, are reflections of that willingness.
If one looks at the American system, voluntarism was the way in which fire departments were developed. Libraries were early attempts to democratize literacy – funded by voluntary contributions. Hospitals, certainly those that existed before the last century, were almost universally begun and supported by faith based or ethnic defined populations, not by taxes or insurance. Even education in general is still not perceived by many as essentially an obligation of the society [read “government”] – leading to massive personal debts for higher education and the controversial charter school movement for the El-Hi levels. But the policy implications of those realities were not typically front-page stories but relegated to academia or field of interest groups.
Therefore, while philanthropy infuses everyday life, for most people it has meant voyeuristic sightseeing of the lifestyles and largesse of the very rich and powerful. They distinguished it from their charitable giving at Church or rent parties or little tin charity boxes at the corner store.
Something has changed and it is important, I think, to talk about those changes and their implications.
1. Unintentional to intentional. As a rule, it is fair to state that philanthropic behavior, until this century, was the unintended consequence of public policy. To take only one example, the safety net of social security permitted funders to, implicitly, feel that there is no requirement that personal giving is the only place at-risk populations can turn. It meant that a funder might well choose to redirect his or her giving to other causes of more personal interest. Another example is the almost universal dependence of public schools on private funding for their arts or cultural activities or class trips. In other words, municipalities no longer feel the need to build in funding for these activities. It doesn’t take much imagination to see that those municipalities with wealthier parents and alumni are likely to provide more co-curricular opportunities than those in poorer areas.
That began to change incrementally during the time when taxes became a dirty word, but the intentionality became very overt during the Bush-Cheney presidency. For one example, after the disastrous and deadly Hurricane Katrina, the first response was not government mobilization but rather the mobilization of Bush Sr. and Bill Clinton to go raise private funds. The tragedy of that approach has been well documented, but for our purposes, it was an important statement about that administration’s view about which sector had what responsibility.
Since then, the role of philanthropy has been a part of every policy and budget decision on the federal, state, regional and local level. It serves to give philanthropy too much power, and, ironically ,far too much responsibility.
2. The democratization or, perhaps more accurately, the anarchization of philanthropy. One can be stopped on the street, sitting at dinner, opening the mail, watching late-night tv and sure enough we’ll be solicited. And because of how easy it is to start fundraising campaigns or to quickly put up websites, many people find it desirable to give directly, and seemingly, without overhead.
Some of this is very welcome. Giving Tuesday has institutionalized on-line giving and has had a huge impact around the world. A thoughtful individual funder can utilize readily available info from Guidestar [now Candid] or many other accessible and free sites. Doing so may or may not lead to wise giving but is likely to reduce the chance of being scammed. And for those with shallow pockets, it can be very gratifying to support a classroom outing in the US or a village seamstress in Africa rather than have those limited funds go through the purported bureaucracies of intermediaries. Of course, there are scams, there are scandals, and there are predators so the disadvantages of anarchized philanthropy is that it may be hard to be sure that one’s money is going where it is promised especially for those who haven’t yet been taught about how to do it best.
Nevertheless, we are still at the early stages of this technology and the systems to support it and it isn’t going away. It is a game changer, empowering all to make the kinds of direct decisions previously reserved for the few.
3. The concentration of wealth, the sheer size of some gifts, the growth of private/public funds under DAFs all have forced the issue of equitability and equity onto the table. Aside from the tax issues referred to above in 1, there are issues of altruistic folks of privilege determining what is best or irrelevant for those who have less and also of the legitimacy of wealthy folks using their foundations and private giving to distort public policy. There has been a slew of recent book-length commentaries on this issue. Their attitudes range from the essential fallacy of a system that depends on voluntary giving to an attempt to rebalance what philanthropy can, legitimately, be expected to do. What is relevant to us at this time in history is not that there are authors exploring and challenging philanthropic behavior – rather that those authors and those books are getting attention beyond our highly gilded sector and getting read widely. [In this piece, I am not addressing some of my own opinions on this since I have done so in numerous other opinion pieces and in public talks elsewhere.]
4. The emergence of “philanthropy adjacent” approaches available to many. This emerges out of a convergence of some interrelated but separate trends. Here too, I am not necessarily endorsing the underlying thinking behind some of these trends, only articulating them:
a. One emerges from an underlying skepticism toward the NFP sector model’s ability to succeed. This approach argues that without a motivation for personal gain, the creativity and long-term commitment to make real change can never be sustained. Therefore, the real solution to long term societal challenges is to develop alternative models where the owner or investor can “do well by doing good.”
b. A corollary of that is the recognition that most ngo/nfp organizations can never have access to the capital necessary to reach the scale to have the impact an “investor” would demand – that traditional “donors” might not. For-profit business, even when B-corps or ESG approved, have access to capital markets that the nfp/ngo sector doesn’t.
c. Foundation and other funders come at this from a somewhat different direction. Why, they ask, should only our philanthropic giving reflect our values? If we care about smoking or societal equity or the environment or food insecurity, we should find ways of aligning what we do with our investment money with the same underlying values that we apply to our giving. Impact investing and values screens are increasingly viewed as mainstream.
d. As many of the major investment firms offer some “values based” funds available through their retirement menu, the average investor now has options previously available only to those with deep bench investment advisors.
5. Systemic thinking has forced funders and policy makers to recognize the interconnectedness of so many elements of what must be fixed. A program grant to a local organization may be very useful but it is highly unlikely to get to the source of the problem. Government SNAP programming is by far the most efficient way to address food insecurity in the USA, but it cannot, alone, eliminate the continuing need. Voluntary clean up of a river will be satisfying but unless there are enforced policies about what is dumped into that river, edible fish are unlikely to return.
Understanding of systemic issues requires an ideological and political commitment to some forms of “intersectionality”. Opinions diverge about what that should mean. For some, the word implies a mandate to think broadly about how all decisions are interconnected. For some others, it means “with us or agin’ us.”
Globalism is another component of the systemic. Despite some misguided political voices these days, there is no such thing as a fully independent national economy or polity, and certainly no border protections from environmental degradation. Those in the philanthropy world who are committed to addressing the “systemic” need inevitably to address the “global.”
6. If philanthropy has moved into society’s zeitgeist, there is a danger that there will be two very problematic long-term responses:
a. That the visibility of foundations and other large giving will mislead people to think that private philanthropy can ever adequately replace public responsibility. As many $Bs are given buy very generous citizens, those dollars are a mere percentage of what an adequate tax/public system should and can provide. In an anti-government era, this would be disastrous since having human services depend fully on voluntarism would condemn millions to hunger and illiteracy and more.
b. That the attention to private philanthropy will lead to severe restrictions on it. The “closing of civil society” seen in so many places around the world, including the USA, might limit all citizens from exercising advocacy and free speech rights we should still cherish. Philanthropy should indeed be subject to a certain public interest transparency, but we should work very had to make sure that independent decision making is not restricted along the way.
Some have argued that we are living in the second Golden Age of Philanthropy. If one argues only from the perspective of UHNW giving, that is true. But in many ways, as the focus of philanthropy moves from aspirational voyeurism to more normal behavior and attention of the many, I would argue that such a characterization misses the point of how radically these changes are . I use the word Zeitgeist to suggest that philanthropy is one of the defining topics of our era in ways never imagined before.
April 1st, 2019
This was first posted on 21 March. Apparently a tech error prevented it from being disseminated to all subscribers.
I was a third generation “legacy” attendee of an Ivy League school. Growing up, I don’t recall too much uncertainty about whether I could go there – only if. We attended football games, my family made annual gifts [although, admittedly, there are no buildings or chairs bearing the family name], and I knew all of the school songs [do they still do that?]
My subsequent career has, I am proud to say, justified their acceptance, but I daresay, looking back, I would have been a marginal applicant today. It is my suspicion that the admissions committee did not have a heart to heart about my capabilities; rather, I was a “legacy; next application…”
In those days, that kind of legacy was sort of assumed. It rarely required an affirmative or expensive buy-in. It was the privilege that accompanied privilege.
We didn’t think about that too much in those by-gone days. I became more aware of it during the 11 years I subsequently spent teaching/working at a different Ivy League school as the world began to change and last names more readily attracted attention. But so did proactive “diversity”. There was the sense that whatever favors names or money or national origin or color brought, they were capable students who just happened to have a leg up in the ever more perverse and competitive admission process. [Along the way, I learned that there was a lot more inscrutability to the process than how much money someone had.] [My son and my nephew chose not to attend the family legacy school, so it is left to our 3-year-old grandson and his cousins to, perhaps, resurrect the chain. But that is a long way off – a good thing given the current financial realities. And only incidental to the remainder of this post.]
In any case, over the past days, there have been millions of words written about the admissions scandals – legal and illegal – in American higher education. What concerns me in reading them is that too many of the op-eds and government responses focus on too narrow a question. Here are some of my responses:
• Let’s be cautious about passing new laws regarding endowments and tax deductability. Bad cases make bad law and too quick a “fix” may saddle us with even bigger problems for both philanthropy and education. Both need fixes – but not headline-driven patches.
• I am struggling with the all too thin line between illegal bribery and legal influence buying. Of course, there is a difference, but they reflect deeper systemic issues that encompass both.
• Underlying the bribery is the reality that that not all favored admission is to the wealthy; it is, though, to the wealth of the school Athletes bring a different financial value to a school. All one has to do is look at how much a university nets from a bowl game or a March Madness slot.
• There is a real issue of what the true meaning of education has become. Here is a case where a very dated marketing device to encourage higher education has come back to bite us: Starting in the 50’s, students were encouraged to attend higher education to enhance their earning ability; true and fair enough. But when earning ability supersedes critical thinking and education as a deep-seated societal value, it loses something. [I needn’t belabor this point: We are paying the price today in the character of public discourse, the absence of critical thinking, and the horrendous lacunae of basic knowledge by too many in the USA.]
• This leads us to the challenge to and of education. We have an ethically abysmal system. Even moderately upper middle-class families cannot afford most elite higher education, and lower middle class are even priced out of State schools. And if one takes a look at the shocking attempts to defund and privatize El-Hi education as well, we have a profoundly cynical approach to the concept of civic obligation toward an educated and literate populace. [I am reminded that Thomas Jefferson and Benjamin Franklin created the first free library out of a belief that a democracy can only function if the demos is literate! How far have we fallen from those ideals?!]]
There are few public policies more transcendent than that of education. With the erosion of the commitment to a thoughtful and thinking population, combined with the sense that, at least at the higher education level, it must be bought, we have a much greater problem than a few wealthy people securing their place in a social caste system.
Philanthropy does not have clean hands in this. After all, the largest gifts typically go to the already wealthy institutions. And while a few outliers like Michael Bloomberg may have committed a 10-figure gift toward scholarships at his own elite alma mater, one has to look very long and hard to find equivalent 7, 8, or 9 figure gifts to the institutions a bit lower on the class scale, but perhaps no lower on the teaching one. Our field talks a lot about equity, power, and the challenge of privilege, but it is rare indeed that our largest investments go to the kinds of investments and grantmaking that redress those societal needs.
More than anything, education needs a major adjustment in public policy – more resources, more affordability, and more genuine commitment to critical thinking. No question that philanthropy can never and should never be expected to do that alone. What we do have is an obligation to make sure that we are using our position of suasion and our resources in ways that narrow the caste, wealth, and learning gap.
If not, we may be sure that Varsity Blues type scandals will continue to cast a harsh light on our privilege.
February 11th, 2019
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.
February 7th, 2019
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.
January 22nd, 2019
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.
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.
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.
January 7th, 2019
This post is the first of a series on “Alignment” as funders – aligning our values, our staffing, our funding, and our intentions. Clients and those who have participated in our educational offerings are well aware of this thinking, but I have not previously published these practica. Please see #328 and #330 as the next installments.
The series focuses on three necessary preconditions for the successful implementation of a funding strategy. It assumes that readers already have chosen what kind of structure in which they are making these decisions – e.g., a private foundation or a DAF or an LLC, et al. For those readers who are still deciding among those options or when to use which, please feel to be in touch directly since those choices are beyond the scope of this series.
A quarter century ago, I realized that the classic strategy process I was taught, and the one still widely used, had real limitations. It called for developing and articulating an organization’s Mission and Vision as the first step in the process. Mission and vision are fine, but why was it, I wondered, that so many of the very same disagreements and misunderstandings that existed prior to developing a mission presented themselves in the decision-making board room only hours after that Mission statement was so carefully crafted?
The insight I had then, one now widely understood and used in the field and recently much disseminated by groups such as GEO and CEP, was that culture trumps strategy. So, the challenge, I felt, was to get deeply into the underlying cultural assumptions of everyone in the room PRIOR to the decision-making process. Surfacing those cultural assumptions had the power of legitimating differing inclinations regarding philanthropic behaviors. [Mission Statements still have an important place in the strategy process, just at a different stage.]
Over the years, as 100’s of foundation clients and those who have taken workshops with me can attest, I have added levels of sophistication about how to get at those assumptions and to lead directly into the next level of decisions that every funder at every level needs to address. Over those same years, additionally, I have formulated the subsequent elements: how to align all of the pieces of strategy – culture, values, focus, capacity, and style to develop an effective implementation. That requires careful alignment of all of the factors that inform those decisions. It is this alignment that makes it all work
As a way to understand this approach, this first piece in the series will address a very contemporary challenge to all of us as funders. While not new, it has never been so crucial as now, nor ever as present in our public discourse – the role of equity in our grantmaking.
To understand this, we need to decide what we fund, how we fund, and who makes the decisions that funding – in this case, about equity.
1. The “what we fund” question seems the easiest – on the surface. After all, social justice, correcting the systemic and endemic inequities that have defined our society for generations, seems to be a no-brainer. There are differing approaches about who should have what role in redressing these ills, but only the myopic or misanthropic deny it is an issue.
a. Compassion: The challenge for most of us is where along the continuum of needs we should use our resources. Compassion may inspire many to provide food, clothing, housing, and other services that provide immediate relief. Indeed, it is typically the first stop along the funding continuum. We see results for a visible problem. Those results may not be lasting, and they are certainly not systemic, but they work – and after all, the food, clothing, or housing is needed now.
For those who desire hands-on involvement, support for their local community or neighborhood, or who want the very legitimate gratification knowing that there is a positive result of one’s personal altruism, this may be a perfect alignment of values and funding.
b. Strategic: It doesn’t take long, for many, to realize that one cannot efficiently or effectively give every homeless person some food or money, so if those categories matter, compassion funding has genuine limitations. Many look for better strategies to leverage their compassion – to feed more people, to house more people, to clothe more people. When we ask the questions of effectiveness and efficiency [and they are NOT synonyms], it leads us to look for organizations that provide those direct services in better ways than we can do ourselves. Our motivations, to make a difference that goes beyond our own individual funding capacity, leads us to examine alternative methods and organizations. This process requires that we need and use additional skills and approaches to make our decisions and lead us to consider a variety of competing claims. For those willing to defer the immediate gratification of direct funding for the satisfaction of a broader and more comprehensive reach to address these same human problems, and willing to put more time and energy into making hard decisions, strategic funding is an important approach.
c. Systemic: Strategic approaches have the advantage of helping make good choices among competing organizations. Not every organization is equally adept at delivering services and not every organization does so in a way consistent with the approach of a given funder. But, for many, even strategic funding is insufficient. For systemic thinkers, the question is not which organization provides food or clothing or housing most effectively, but rather how to eliminate the need for those services at all.
Once one begins to approach questions of equity systemically, it becomes evident that most issues require a multi-sector approach and are not simply a matter of choosing between the best available option. If someone is homeless, it reflects a confluence of failures. A solution also requires a convergence of interventions. No single entity, indeed, no single sector, can deal with the large issues of homelessness, food insecurity, long term economic disparity, education, and, of course, poverty. Each requires public policy responses, private sector investments, social service expertise, and community development organizations – in addition to private philanthropy.
Aligning these efforts is no small task – failures far outnumber successes. Funders need patience, mediating skills, advocacy, a willingness to surrender some autonomy, and a tolerance for failure. A full self-awareness of the elasticity and parameters of one’s funding culture and style are preconditions. If these larger systemic challenges align with your comfort level, it opens up the possibility of addressing and perhaps making a permanent dent in society’s more resistant challenges. If, though, you don’t bring those attributes to the table, it is likely that this kind of funding will prove frustrating and unsatisfying. Alignment matters.
All three of these funding approaches legitimately count as equity funding but not all will work for every funder. Thus “alignment.”
2. How we fund is about the methods we use to get the information we need and then how we make our choices. After all, any subject as big as “equity” has many players, and at many levels, and there are very legitimate competing claims for our resources..[There is no end to information we can gather about potential grantees, but much of it is not useful, or won’t really be used to make a decision. If you would like further advice about how to understand and effectively utilize the kinds of information that can inform our choices, please be in touch directly. That is beyond the scope of this series.]
Depending on how open or controlling we wish to be in our grantmaking, how competitive or funder pre-determined our method, will help lead to our approach for getting proposals in our docket. As we will see in #330, much of this directly relates to our preferences or choices about staffing, but it also reflects different preferences about how we wish to spend our time, how open we are to innovation, how committed we may be to certain organizations, and what relationship we wish to have with grantees.
There is no single correct/right way to do this, and indeed many funders use multiple approaches. What is clear, though, is that if we are never open to new ideas or explorations from organizations we have never funded, our own knowledge can easily become stale. And since equity has historically been so elusive to achieve, it would be quite shortsighted to presume that our past approaches are sufficient or our knowledge complete.
The implications for equity funding are very real. Those who are committed to established organizations are more typically [not always] more risk averse, and more likely to want to establish or maintain direct involvement with a limited number of organizations. Their confidence in those organizations makes it more likely that core support will be provided, or that new projects will be developed collaboratively. They are more likely to use evidence-based criteria, and it is likely that any projects they fund will succeed albeit in a strategic and not systemic way.
Except for the deepest pocketed funders, this also, typically, leads to organization that are either geographically or ideologically very close to the funders. Very very few funders have the in-house expertise to determine organizational effectiveness all over the place. Similar to the above, it leads to a likelihood to provide operating grants or core support and to be committed to the strength of the organization as a necessary precondition to reducing inequity in the field in which that organization works.
However, as we have stated above, we also know that there are problems that can only be addressed systemically, at scale, and with equal parts guts and patience. Funders open to partnerships and collaborations, willing to take big risks, and accept uncertainty are more likely to fund this way – and therefore will customarily choose to use a more varied process for obtaining potential grantees and projects. If one wants to get at the underlying causes of poverty or the seemingly ineradicable racism in American society, equity issues if there ever were any, we will likely broaden the sources of information, expand the scope of the thinking, and look for intersector opportunities before proceeding. This will usually demand a much longer time frame for decision making and be much more committed to using a not yet proven theory of change.
The alignment issue is quite clear in these examples. At different stages along the way, a funder is in or out, has comfort or doesn’t, considers the challenge within their scope of focus or not. What matters is being sufficiently self-aware to make the choices that will work best.
3. Who makes the decision: For those who have been on the funder side of the table for more than a while, this may seem to be a strange question. After all, one of the hallmarks of private philanthropy is the autonomy it allows. All sorts of people might be invited to have opinions or share their expertise, but the decision about who makes the decision where to give the money is [was] clear – and not terribly negotiable.
The “equity” question, though, forces a different reckoning – and it is here where debate is rampant in our field. And for good reason. Philanthropists and foundations are reflective of the haves. There is an implicitly patronizing element to our work – no matter how genuine and beneficent our affect and intentions. We traditionally give TO those who need it – or, more accurately, to organizations who know who needs it. How often are our recipients in the room, in any of our decision-making rooms?
If one wishes to reduce the divide and responsibly work toward social justice, it means, many now say, that funders need to take seriously the new mantra “nothing about us without us.” They would argue that the real change that must take place is not that money needs to be allocated with care, but who actually makes the decision.. This equity argument has both a practical side [“who knows better than we…”] and a justice side [“who are you to decide what is best for me…”].
Even if one fully endorses that empowerment should be a given, it is far from a given where in the continuum of decision-making that empowerment ends. The arguments range from full surrendering/delegation of decision-making to the impacted stakeholders to making sure that they have seats at various tables along the way.
From a philanthropy perspective, it is far from easy. Succession and surrendering control have proven hard enough when the successors are family. To go so far as to say that the only true social justice philanthropy is surrendering decision making to what had previously been the “recipient class” is a profound and radical leap.
Yet if one is committed to addressing systemic inequities, and eradicating destructive class and financial divides, it is a discussion that one must have.
Alignment in #1 and #2 above are making sure that our way of being funders works best – for us. #3 reminds us that none of our decisions is made in a vacuum. Each has implications not only for how we do our work, but what our values and funding stand for. That is never easy…but always important.