private foundations PLUS

Thank You, Government

noreply@blogger.com (Anonymous) — Tue, 10 Jun 2014 01:05:00 +0000

Foundation and public charity leaders want government to be a good partner to their efforts, but fail to question if they’ve been a good partner to government.

An important tactic to creating positive social change is to participate in advocacy. Government—at municipal, state, or federal levels of the U.S.—has more money than the private philanthropic sector and, with the single stroke of a pen, can enact policies that would significantly advance nonprofits' missions. It’s no wonder then that conferences of nonprofit or foundation professionals often include a session on how to approach and influence elected officials. Designed to help nonprofits pitch their causes, these sessions are about convincing elected officials to see the world from a nonprofit perspective.

But do we ever, as nonprofit workers, ever sympathize with government? Do we ever ask ourselves what we can do to help strengthen government, particularly when it comes to advocating for expanding government services to redress inequities, reduce income inequality, redistribute opportunities, and enact social changes that would benefit all? Now, THAT would make for an interesting conference session. The nonprofit sector has been too uninterested in the welfare and well-being of government, which is actually to the detriment of the entirety of nonprofits’ efforts.

Advocacy, by and large, has been about influencing elected officials; it’s about how government can help me, my nonprofit cause, my social change agenda. In this way, nonprofits’ advocacy activities reflect a fragmented, special-interest driven nonprofit sector. Your elected official is sitting down with an education reformer one day and an environmental advocate the next. Moreover, how we are being taught to conduct advocacy enacts an adversarial dynamic in the nonprofit-government relationship. Government representatives are perceived as gate-keepers to much-needed resources and policies who need to be convinced of the merits of your nonprofit’s interests.

In our single-minded focus on advancing our own sector-specific causes, we have forgotten the importance of government’s own social welfare mission and role. Among nonprofits, there are many special interests spanning all sorts of issues, but where’s the group devoted to advocating on behalf of government? For instance, there's no national foundation collaborative raising a furor to ensure that civics and U.S. government classes remain a core high school education instruction. Yet doesn’t educating young minds on government's role in the functioning of a democracy help the entirety of the third sector, which depends on voluntary democratic action? It's like we're fighting too many battles and losing the war. Of all people, why haven't those in the nonprofit sector been able to appreciate the need for a strong government in fighting poverty, advancing education opportunities, and fighting climate change? Successful foundation initiatives and nonprofit programs cannot be taken to scale when the role of government is diminished in the eyes of the public.

When foundation and public charity leaders approach elected officials for support, they should also be asking what they can do to help strengthen government in meeting larger social welfare needs. After all, government is not an adversary to nonprofits' interests: Rather, government is the nonprofit sector's complement (for theories of the government-nonprofit relationship, cf. Frumkin, 2006; Sandfort, 2008; Young, 2006).

But, the nonprofit sector has been strangely and alarmingly silent in defending the role of government in improving lives. Why wasn't there a unified and loud nonprofit voice defending the Affordable Care Act--the most important progressive social welfare act of this generation? The ACA singlehandedly will help all nonprofits and foundations come closer to realizing their missions by helping clients of grantees live healthier lives as well as by improving the capacity of grantee organizations by protecting the well-being of their volunteers and staffs. More recently, why didn’t the nonprofit sector stand up together to defend the importance of the IRS in regulating (and protecting the reputation of) the nonprofit industry when the IRS was attacked for scrutinizing far-left and far-right groups? You may, too, have bought into the criticism that this was a government overreach but by being silent and not rising to government’s defense, the nonprofit sector has been complicit in effectively weakening government. And a weakened government at any level is not only bad for those who stand to benefit from taxpayer-enabled social welfare programs and efforts—the poor, the uneducated, the mentally ill, the immigrants—but it’s also bad for the nonprofit sector at large. Government’s programs, funding, and policies comprise the national infrastructure of social welfare and is what foundations and public charities depend upon to leverage their contributions and activities.

I'm happy to go against the general sentiment of government unpopularity by expressing my appreciation to government for:

my ESL class when I first came to this country. (Admittedly, it was a bit confusing as a Korean to be put in Spanish ESL to learn English but, hey, I managed OK.)
my public education. (Albeit not the source of happy memories, this education effectively taught me to read, write, think, and express myself.)
my government-subsidized college loans. (I’m still paying this off and not entirely happy about it, but I'm eternally grateful for the opportunities it afforded.)
my food stamps which was the only way I was able to feed myself in college.
an environment back in the 1990s (which is no longer the case today) that made affirmative action OK, thus opening doors to education and work that would have been closed to me in a culture of homogeneity.
making financial institutions write to me in plain English. (I actually now read my Bank of America “Notice of Changes” letters, relishing how clearly they are articulating what they’re up to.)
government grants to nonprofits for creating a robust independent sector that has allowed me to work in ways that satisfy both my mind and my heart.

In the clip below of a 2013 South Park episode, Butters (yes, that’s his name) concludes his day with “Dear Government, Thank you for watching over me.” At least when it comes to the U.S. government, I couldn’t agree more. What do you thank government for?

Works Cited

Frumkin, P. (2006a). Accountability and legitimacy in American foundation philanthropy. In K. Prewitt, M. Dogan, S. Heydemann, S. Toepler (Eds.), The legitimacy of philanthropic foundations: United States and European perspectives (pp. 99-122). New York, NY: Russell Sage Foundation.

Sandfort, J. (2008). Using lessons from public affairs to inform strategic philanthropy. Nonprofit and Voluntary Sector Quarterly, 37(3), 537–552. doi:10.1177/0899764008320270

South Park. (2013). Let go, let gov [television series episode]. Los Angeles, CA: Comedy Central.

Young, D. R. (2006). Complementary, supplementary, or adversarial? Nonprofit-government relations. In E. T. Boris & C. E. Steuerle (Eds.), Nonprofits and government: Collaboration and conflict (2nd ed., pp. 37-79). Washington, DC: Urban Institute.

Fixing a Problem of Foundation Payout

noreply@blogger.com (Anonymous) — Wed, 30 Apr 2014 19:26:00 +0000

The topic of private, non-operating foundations’ payout has not been popular as of late. This is not surprising as we are still in the aftermath of one of the worst financial crises to hit the U.S. Arguably, however, this topic shouldn’t be tied to how well or how poorly foundations’ investments are faring; rather, payout should be an ongoing discussion as it represents a timeless question of what we want foundations to achieve. Hence, I’m bringing this topic up again, but with a different approach to this conversation. Rather than advocate for a solution based on a personal ideology of what I think foundations should be doing, I’d like to revisit a technical benefit of tying foundation payout to investment performance, a long-forgotten part of the original tax code that was jettisoned with too little deliberation. To get to my point, it’s worth pausing on (1) the genesis story of payout to contextualize why this topic has been so controversial and (2) the ideologies underlying the payout rate before moving on to (3) my own suggestion of how foundations can maximize charitable spending while retaining donors’ privilege of grantmaking.

If you’ve been in the foundation sector long enough, you’ve read countless articles and listened to innumerable speeches of the pros and cons of either maintaining the 5% minimum distribution rate or raising it to increase charitable spending. The notion of the payout requirement is rooted in the Tax Reform Act of 1969 (TRA 1969), which is what first recognized and regulated private foundations. One way to think of payout then is that it is a defining characteristic of foundations and is what distinguishes private foundations from any other type of charitable entity.

TRA 1969 was an outcome of years of distrust of endowed philanthropies. Before the Act was passed, endowed charitable organizations, such as the Ford Foundation, were being roundly criticized for protecting wealth and not distributing it for taxpayer benefit. Beginning in 1961, Congressman Wright Patman of Texas made it his personal mission to go after what he considered to be tax shelters for the elite, and his efforts were rewarded with the signing of TRA 1969 by President Nixon who declared, “Tax-free foundations were brought under much closer Federal scrutiny. . . . [as] congressional consideration of this matter reflected a deep and wholly legitimate concern about the role of foundations in our national life.” Patman’s suspicion of foundations was not unfounded. Private foundation expert Troyer (2000) recalled that when he entered law practice in the late 1950s, tax lawyers and estate planners used to advise clients to establish endowed nonprofits as a way to avoid estate taxes and as an instrument to maintain control of wealth.

What TRA 1969 effectively did was distinguish between private foundations and public charities (the former fails the public support test) and required that foundations must distribute a minimum amount of their wealth annually. (I should mention that all this pertains only to non-operating foundations; operating foundations’ direct charitable activities exempt them from payout.) At the time, there was very little consideration given to determining an appropriate minimum rate: Hence, the rate was set without “any systematic data about the consequences it would have on the operations of foundations” (Salamon, 1992, p. 119). When TRA 1969 passed, the minimum distribution requirement was set at an annual rate of 6% adjusted based on investment rates and market yields. In other words, legislators favored a distribution rate that was on par with investment yields so that money gained would be spent. Put more bluntly, the winning sentiment was that foundations should not last into perpetuity and wealth should be given away for the good of all. But this sentiment did not last, and under much pressure from foundation executives, the law was changed to a flat 5% rate in 1981 (TRA 1981).

What are we to make of this history? My own view is that the 5% rate should be seen as a compromise between those arguing for preserving wealthy elite’s privilege to practice philanthropy (i.e., the ‘private interest’ position) and those who see foundations’ tax-subsidized assets as accountable to the public good (i.e., the ‘public interest’ argument). Although there was strong opinions from both sides, there is nothing clear-cut in the historical documents or in the legal codes that definitively answers which viewpoint is more correct. In actuality, TRA 1969 and TRA 1981, taken together, reflect a great deal of ambiguity by making private foundations beholden to both public and private interests: TRA 1969 mandated spending for the public good while TRA 1981 protected foundations’ ability to exist into the future. Given the lack of clarity in policy, it’s no wonder that the payout rate has remained a source of contention over the years.

Hence, much of the debate over payout pivots on the fundamental differences in opinions of what and whom foundations should serve. Consequently, such an outsized ideological cage match has diverted attention from smaller details of payout regulation that merit attention. For instance, under current regulations, there is no answer to the question of what happens to foundations that realize greater yields on investments that surpass charitable spending. In other words, what should happen to foundations that grow wealth at a greater rate than they redistribute it? The answer, I would argue, lies in the original TRA 1969 notion of tying spending to investment returns.

I suggest that a foundation’s payout rate be determined by comparing its charitable spending rate and its yield on investments, minus rate of inflation, over a 25-year time horizon. (A variable payout rate is not a new idea [cf. Frumkin, 1998] but what I propose is a much longer time horizon to support intergenerational equity.) So, let’s say that a foundation averaged distributions of 5% over a 25-year period and over that same period the average rate of inflation was 5.17% (this is actually the averaged inflation rate between 1975-2000), the foundation would then need to distribute at a rate of .17% more over the next 25 years. The calculation begins with a foundation’s first tax return and if the averaged inflation rate is below the mandatory minimum, the 5% still applies. In actuality, most foundations distribute more than 5% of non-charitable use assets so, given the rate of inflation, this proposal will not likely result in public charities experiencing a huge windfall. What this proposal does do, however, is ensure that wealth does not growing disproportionate to charitable obligations. In sum, by basing adjustments in payout rate over the long term, this would protect foundations’ financial ability to work toward perpetuity while ensuring that any investment gains beyond rates of inflation are spent for the greater social good.

What this proposal does not do is resolve the debate about whom foundations should primarily serve—foundation owners or the public good. Hence, I'm not going to touch the question of how payout should affect perpetuity, which would require greater clarity in policy about a foundations' social role. Short of that, however, an adjusted payout rate minus inflation over nearly a generation timespan ensures that foundation wealth does not grow at the expense of taxpayers’ expectations for social benefits. Although there has been criticism of even having a payout requirement (Deep &Frumkin, 2001), we now know empirically that mandating distributions has been effective. Desai and Yetman (2005) discovered empirically that foundations behaved more charitably in response to government regulations and oversight. Furthermore, Worthy (1975) found that foundations paid out less before the mandatory distribution requirement than after its implementation. Therefore, the payout requirement is working and merits continued refinement, particularly in calibrating the balance between competing desires for wealth accumulation and charitable spending.

Works Cited

Deep, A., & Frumkin, P. (2001). The foundation payout puzzle (Working paper no. 9). Cambridge, MA: Hauser Center for Nonprofit Organizations, Harvard University.

Desai, M. A., & Yetman, R. J. (2005). Constraining managers without owners: Governance of the not-for-profit enterprise (No. w11140). National Bureau of Economic Research. Retrieved from http://www.nber.org/papers/w11140

Frumkin, P. (1998). The long recoil from regulation: Private philanthropic foundations and the Tax Reform Act of 1969. The American Review of Public Administration, 28(3), 266–286. doi:10.1177/027507409802800303

McGlaughon, K. (2013). Foundation Source annual report on private foundations (No. 2). Fairfield, CT: Foundation Source. Retrieved from http://www.foundationsource.com/resources/FS_2013_Annual_Report.pdf

Renz, L. (2012). Understanding and benchmarking foundation payout. New York, NY: Foundation Center. Retrieved from http://foundationcenter.org/gainknowledge/research/pdf/payout2012.pdf

Salamon, L. M. (1992). Foundations as investment managers, part 1: The process. Nonprofit Management and Leadership, 3(2), 117–137. doi:10.1002/nml.4130030203

Troyer, T. A. (2000). The 1969 private foundation law: Historical perspective on its origins and underpinnings. The Exempt Organization Tax Review, 27(1), 52–65.

Worthy, K. M. (1975). The Tax Reform Act of 1969: Consequences for private foundations. Law and Contemporary Problems, 39(4), 232–254.

What’s Wrong with a Standard of ‘Excellence’ in Grantmaking?

noreply@blogger.com (Anonymous) — Thu, 20 Mar 2014 01:41:00 +0000

The role of the nonprofit sector is to address the kinds of problems that haven’t been able to resolved in the consumer-driven marketplace. This concept has been well described by economists such as Hansmann (1981) who called this contract failure to imply individual consumer’s unwillingness to pay for goods and services that are for the benefit of all. More colloquially, we call this the tragedy of the commons wherein goods and services that benefit the masses cannot be sold through a capitalistic approach. The nonprofit sector exists, then, to correct marketplace failures so that the things that are good for society—environmental conservation, cultural expression, and opportunities for advancement by those who are poor—actually get addressed. Hence, the nomenclature of nonprofit is not to imply an inability to retain a profit, after all, every enterprise needs a financial surplus to be sustainable and vital, but rather to describe activities that exist outside of profit-making motives.

Because nonprofit entities are responsible for redressing problems that have failed to be addressed in the marketplace, private foundation grantmakers should be wary of incorporating competition-based approaches in their practices. Merit-based decision-making has been repeatedly shown to be inadvertently discriminatory: “According to the ideology of meritocracy, inequality is seen to be fair because everyone presumably has an equal (or at least an adequate) chance to succeed, and success is determined by individual merit (McNamee & Miller, 2009, p. 4).” In other words, if meritocracy worked—that is, if everyone enjoyed fair and equal opportunities based on a level playing field—then there really wouldn’t be a need for charitable and philanthropic entities to exist. The proprietary sector would be an effective place for everyone to be able to rise out of poverty. But we know that for those who struggle, the opportunity to make money is not fairly distributed. Therefore, why do private foundations apply the same marketplace-based principles and practices that further disadvantage the already disadvantaged?

A foundation practice that harms rather than helps is decision-making based on the notion of excellence. Making excellence a primary criterion precludes supporting those who lack capacity. Put another way, a standard of excellence ensures that resources flow to those with already demonstrated capacity. Capacity, in this case, can mean a lack of demonstrated success, not being well-connected to foundation insiders, an insufficient budget size, or inexperience. By giving grants based on excellence, this favors applicants with a demonstrated track record of success, those with insider connections, and those with enough savvy to know how to work the foundation system in their favor; in other words, a criterion of excellence perpetuates an elitism that should have no place in a sector tasked with righting wrongs. Standards of merit and excellence discriminate against those who fall outside of the right networks, who haven’t had advantages to navigate grantmaking processes, and who lack the individual capacity to excel in this system. Think of rural communities, poor communities without local donors, and non-English speaking communities and you get a sense of who gets left out of a system of philanthropic meritocracy.

The problem of an excellence-based grantmaking lens is inextricably tied to the problem of competition in grantmaking. For sure, there are far too many applicants than foundations can support, but supporting those who are good competitors precludes those who are of different backgrounds, networks, experiences, and knowledge. By making decisions based on best articulation of a project, superior editing of a proposal, the most seamless site visit experiences, and a track record of success, foundation support will always go to those who already demonstrate success. Now, I don’t have a problem with this necessarily—nonprofits that have these elements (i.e., they have their act together)—are a safe bet for successfully working toward their mission. In other words, the most capable nonprofits should be rewarded in a competitive grantmaking environment. But the problem is that the peoples, regions, and issues that lack capacity and are, therefore, not as competitive, are the ones that most need grantmaker support and yet remain under-served philanthropically. Therefore, the practice of competition should be based more on redistributive outcomes and less on excellence.

Gatekeepers to philanthropic wealth would be well served if they become more self-critical of their own biases. This means that for those who were richly rewarded in the capitalist system, it means having the humility to recognize that how they achieved their success cannot be universally applied to others. It also means that for program staff who have risen because of their accomplishments, attention to detail, and creativity, it means having a kind of sympathy that can overlook spelling errors, lack of perfect execution and written articulation, and proposals that seem non-sexy for being focused on necessities and basics. All this means that grantmakers would do well to ask themselves:

How are my personal biases and expectations of what it means to be successful inadvertently blocking those with less means and capacity access to opportunities that I control?
Is access to funding based on inadvertently discriminatory practices that make it harder for poor, non-urban, or culturally different people to compete?
Are those with the ‘right’ connections better able to compete for funding because it ameliorates my own and therefore my foundation’s risk?
Do I feel more comfortable investing in people with whom I feel I have a cultural connection? For instance, do we listen to the same NPR programs? Did we share the same alma mater or major? Do we have children in the same schools? Do we bond over the same sports teams? Do we compare frequent flier experiences?
Do I make myself accessible to people in communities that fall outside of standard nonprofit spheres? Keep in mind that opportunities arise from simple luck—chance encounters, unexpected connections. If foundation trustees and employees only network within their own familiar circles, then not only are those outside of your cultural, academic, and professional networks already disadvantaged, but they are even deprived of the opportunity for dumb luck to strike.

This kind of introspective questioning can improve how foundations redistribute not only wealth but also opportunity. Furthermore, such a redistributive lens helps ensure grantmaking dollars directly, and not through trickle-down effects, support those who represent the change we want to see in the world. As the wealth gap increases and already poor, ethnically diverse communities become even poorer (Hook, 2013), foundations must be part of the solution and not exacerbating problems.

All this is not to say that grantmakers should drop the practices of competition; after all, limited resources beget competition. But if grantmakers want to be able to change structural problems of inequality, then they need to be able to recognize practices that re-enact, not redress, unequal access. One major place to start is by becoming more aware of how competitive approaches based on merit-based criteria actually replicates the problems of the marketplace so that the growing gap between the haves and the have-nots become perpetuated in the nonprofit sector. If the nonprofit sector is the place to take care of societal problems that couldn't be addressed through capitalist economics, then private foundation grantmakers need to counter this by applying a decision-making lens that makes different backgrounds and limited opportunities important criteria over the criterion of excellence.

Works Cited

Hansmann, H. (1981). The rationale for exempting nonprofit organizations from corporate income taxation. The Yale Law Journal, 91(1), 54–100. Retrieved from http://www.jstor.org/stable/10.2307/795849

Hook, B. (10 May 2013). The racial wealth gap [Infographic]. Sojourners. Retrieved from http://sojo.net/blogs/2013/05/10/infographic-racial-wealth-gap

McNamee, S. J., & Miller, Jr., R. K. (2009). The meritocracy myth. Lanham, MD: Rowman & Littlefield Publishers, Inc.

A New Level of Principled Foundation Grantmaking

noreply@blogger.com (Anonymous) — Tue, 04 Feb 2014 20:13:00 +0000

For those foundation leaders who want their decision making to be insulated from public scrutiny, this is a moment of growing anxiety. There are signs that foundations will need to do more to demonstrate their public good value. For foundations in California, this anxiety reached an apotheosis in 2008 when legislation was introduced—California AB 624—that would have made it easier to find out how much or how little foundations were supporting the interests of the underserved. Foundations effectively succeeded in killing the bill when they pledged $30 million to support minority-led organizations. Now there’s a new website, Inside Philanthropy, that makes available the kind of information that is usually only known to foundation ‘insiders’. In an effort to make foundation workings more transparent, the website will include articles illuminating foundations' hidden funding agendas and processes (not just what’s available on their websites) and share stories from foundation grant seekers who will rate foundations. Think Yelp reviews by fundraisers on foundations.

On the face of it, Inside Philanthropy seems to provide customer service-oriented information akin to what Center for Effective Philanthropy has been collecting in their Grantee Perception Report; but what is substantially different is that Inside Philanthropy serves those outside the foundation world while the Grantee Perception Report serves those within foundations. In other words, the launch of Inside Philanthropy is a win for those wanting foundation performance to be more accountable to constituents’ interests.

Foundation heads have been attentive to the trends of transparency, with a few welcoming this trend as an opportunity for more effective grantmaking. Others, however, see increased transparency as a slippery slope toward public accountability, which seems to mean losing ownership of foundation resources. Those who feel threatened by public-interest grantmaking have a forum for fighting this trend and protecting the autonomy of private philanthropists: The nonprofit Philanthropy Roundtable protects philanthropic freedom of expression (i.e., the ability to make grants however, to whomever, and to whatever causes short of private inurement) and preservation of wealth so that family philanthropies can pass on the financial ability to become philanthropists to their descendants. Even though foundations’ tax-subsidized status may be grounds for arguing that foundations should work in the public’s interest (Porter & Kramer, 1999; see also Deep & Frumkin, 2002; Prewitt, Dogan, Heydemann, & Toepler, 2006; Toepler, 2004), Philanthropy Roundtable promotes private interest-focused philanthropy as a means to enacting democracy through expression by society’s wealthy elite.

As the gap between the wealthy and the poor widen, it should be no surprise that public skepticism of the wealthy is growing, with even private foundations unable to escape critical attention. Unfortunately, while there are numerous outlets for private-interest philanthropists to exercise and protect their power (e.g., Philanthropy Roundtable and even the protectionist stance of Council on Foundations), there is nothing for those interested in advancing a new level of philanthropic practice that prioritizes the greater good over the interests of private individuals. There is no equivalent national forum or platform for foundation leaders who want to rectify structural social problems and more effectively redistribute wealth and opportunities in ways that counteract the effects of a capitalist economy. After all, the nonprofit system exists to take care of the things that could not be capitalized in the marketplace. Yet there is little opportunity for such thinking to coalesce into a movement, let alone to counterbalance the influence of conservative organizations that protect philanthropic autonomy and the wealth of foundations.

Consider that with the Tax Reform Act of 1969 foundations are meant to do two things: Perform a public good (and not inure private benefits to its owners) and redistribute wealth. But today’s private foundations' worldviews and practices have remained largely unchanged from the philanthropic model established in the 1920s by the fortunes of Andrew Carnegie, Russell Sage, Henry Ford, and John D. Rockefeller (Parmar, 2012). Yet, the social problems of today, including the growing gap between rich and poor, demand a new level of performance by private foundations. In effect, when public sentiment turns against wealthy elites, this is not the time for foundation leaders to fight to protect their interests, but rather a bar should be raised for foundations to demonstrate their public good. (Such conditions are what led to the Tax Reform Act of 1969 that introduced regulations on private foundations.) I suggest that today’s foundations need to evolve to a new level of performance never before realized. This new level of private foundation performance would achieve the following four things, all of which are meant to redress aspects of structural social inequalities:

1) Use a public accountability lens. Enable people who hold different worldviews from foundation owners and who have an informed healthy skepticism of foundations to not only inform grantmaking strategies and decisions but also be given voice to hold foundation performance accountable. In some ways, Inside Philanthropy is doing this by giving fundraisers the opportunity to weigh in on foundation performance but it's unclear if this experiment will actually help foundations achieve improved mission-related performance or only help fundraisers be more effective in identifying foundation resources. Enabling public accountability to become part of foundation operations and culture does entail using a diversity, racial equity lens, but the ultimate goal is not better representation but rather to help foundations be a more democratic enterprise. Certainly, achieving better representation of different types of people is important, but if achieving diverse representation is the endgame then it’s just not enough to bring about structural social change.

2) Consider foundation owners’ own complicity in contributing to the social problems that they are now trying to solve. Theory of change documents include such lofty ambitions, such as, “Improve low-income student academic performance.” But without addressing built-in inequalities in this country, foundations are actually fighting a losing battle as the gap between rich and poor widens and foundation donors remain ignorant of how they contributed to this dynamic. The very things that helped foundation founders achieve great success--entrepreneurship, business-minded approaches, competition, use of scientific knowledge--can become the very traits that hurt their ability to realize positive social outcomes and actually exacerbate social inequities (Parry, Field, & Supiano, 2013). For instance, rather than impose competition-based performance standards that worked in the commercial marketplace on the nonprofit sector, foundation leaders need to take a step back to understand that those very standards are what made it difficult for people without resources to compete in the first place. Why replicate the same standards in a sector where concepts such as ‘excellence’ continue to inadvertently disadvantage those who have not been able to 'work' the system?

3) Re-think the infrastructures that your foundation has supported. Foundations with strategic focus areas are typically attentive to the ‘ecosystem’ of nonprofits working in their issue area. Foundation staff need to ask themselves: Is this network reflective of the diversity of people in the United States? In other words, is this infrastructure led by nonprofit executives who reflect similar worldviews as that of funders: Did they go to the same camps, schools, colleges, and churches? Do they bond over the same music and shared love of certain public radio stations? In other words, are foundations investing in people who share their worldview and, thus, unintentionally keeping the financial resources circulating in a closed network? Is the infrastructure that has foundation backing privileging communities that are relatively well-resourced compared to communities of color, religious diversity, and rural populations? If so, foundations are actually contributing to widening opportunity gaps that fall along income, class, race, religious, and urban vs. rural lines. If the past five decades can be credited for helping to build nonprofit infrastructures, let’s have the upcoming decades be remembered for shaping infrastructure and networks to be more inclusive, equitable, distributive of opportunities, and socially just. The way forward entails foundations doubling down on supporting the very people who represent the underserved voices who need to be empowered in the world. For international, developing world funders, the opportunity is now to shape new infrastructures by giving people without political voice a platform to speak rather than replicating 'Great North' NGO infrastructures that are led by people who speak on behalf of Others.

4) Quit perpetuating myths that government is at worst 'the enemy', at best a 'weak but necessary partner', and on most days a piggybank to leverage foundations' agendas. When the Obama Administration's Neighborhood Revitalization Initiative supports communities using a competition-based approach based on local ability to generate private foundation matching funds, more money flows to relatively well-resourced urban communities. When private foundations are in the driver's seat in setting the priorities for capturing government money in Pay for Success or Social Impact Bonds, once again private funders are drawing public funds toward parts of the country with relatively better capacity. These projects are important and innovative endeavors, but foundations need to remember that when they exert such a large influence, they inadvertently stymie efforts to spread government resources to areas outside where foundations operate. Foundation workers need to not only help keep government remain committed to social welfare, but also help (and not distract) government from spreading its resources more equitably.

Which brings me to a larger point about the interaction between foundations and government, which is that foundations actually need a strong government to realize charitable purpose. Foundations' narrow foci and relatively minuscule budget sizes will never be wide or large enough to realize their missions without government. A weak government and influential private foundation sector has led to current conditions, which is not ideal, equitable, or democratic: widening gaps of opportunity between haves and have nots in accessing nonprofit services; increasing wealth of elite higher education, cultural, and medical institutions that serve a minority of the population; and less resources for places and peoples that cannot compete in a competition-based, performance-driven nonprofit marketplace. In the mid-twentieth century, our foundation ancestors contributed to strengthening government by advancing modern welfare reform, which helped them realize their own agendas (Parmar, 2012). Today’s foundation leaders who see themselves as the only and best solution to social problems forget that government is better able, through their equal opportunity mandate and budget size, to serve the needs of all. Foundations would be well-served if they stopped thinking of government as a broken partner and start empowering government with vocal support.

I started off by prioritizing the importance of using a public accountability framework in grantmaking. Incorporating a public accountability lens is what would distinguish tomorrow's private foundation practice from what has come before. It's a principled approach that serves the greater good beyond siloed manifestations of personally held values and ethics. With this lens, the subsequent steps are specific ways to improve private foundation practices taking into account the legacy of their accomplishments and shortfalls: adapt the strengths of foundation leaders for a social change environment lest their biases and tendencies inadvertently do harm; redistribute wealth by investing in those who represent the change we seek in the world; and act as a supportive (not outsized) social welfare partner to government. Incorporating these approaches within an accountability framework would help foundations come closer to fulfilling internal mission-related mandates as well as earn the trust of external stakeholders. Why? Because such changes move foundations closer to addressing the roots of structural problems plaguing society while effectively utilizing the power of autonomy.

Works Cited

Deep, A., & Frumkin, P. (2002). The foundation payout puzzle (Working paper 9). Cambridge, MA: Hauser Center for Nonprofit Organizations, Harvard University.

Parmar, I. (2012) Foundations of the American century: The Ford, Carnegie, and Rockefeller Foundations in the rise of American power. New York, NY: Columbia University Press.

Parry, M., Field, K., & Supiano, B. (2013, July 14). The Gates effect. The Chronicle of Higher Education.

Porter, M. E., & Kramer, M. R. (1999). Philanthropy’s new agenda: creating value. Harvard Business Review, 77, 121–131.

Prewitt, K., Dogan, M., Heydemann, S., & Toepler, S. (Eds.). (2006). The legitimacy of philanthropic foundations: United States and European perspectives. New York, NY: Russell Sage Foundation.

Toepler, S. (2004). Ending Payout as We Know It: A Conceptual and Comparative Perspective on the Payout Requirement for Foundations. Nonprofit and Voluntary Sector Quarterly, 33(4), 729–738.

Futurist Scenario Exercise

noreply@blogger.com (Anonymous) — Mon, 11 Nov 2013 23:06:00 +0000

Besides being interested in the nonprofit sector, I have also been interested in new ways of delivering education and how these disruptors are changing pedagogy. One way that these two interests have intersected is that I am volunteering to be a "test pilot" for the American Alliance of Museums's Center for the Future of Museum's (AAM/CFM) MOOC that is in beta-testing mode (i.e., Massive Open Online Course). (I know, I know--that's just way too many acronyms!) While writing my previous post from November 2 about the limits of the nonprofit sector, I was also completing a homework assignment for CFM's MOOC class. I did enough of a good job on my homework assignment (whew) that CFM posted it on their own blog. I didn't realize the conceptual connection between my blog post and homework assignment until CFM's founding director Elizabeth Merritt called it to my attention, and so I'm posting my homework assignment here. This can be a companion, exercise-oriented piece to my November 2 post.

To give a little context to the exercise, what follows is an imaginary scenario written to stimulate thinking about trends happening today that will impact the future. This scenario is not meant to be predictive, rather it is meant to be provocative. Exercises like this help organizations really plan for the future, not just in short three-year strategic planning chunks, which is far too short-term to effectively plan ahead. You can answer these questions yourself or as a group with co-workers. One of the shortcomings of organizations in the nonprofit sector has been their inability to plan ahead in ways that take into account major trends, such as demographic changes, economic forces, and technological advancements. I wrote a guest blog post on that topic for CFM way back in 2010, which you can also read here. Using the following exercise is a way to anticipate and ready organizations today for dramatic changes that will certainly come.

(Originally published by Elizabeth Merritt, founding director of the Center for the Future of Museums on November 5, 2013. The following is her original post copied here.)

THE FOURTH SECTOR
The second flight of “Test Pilots” is winging their way through the CFM Digital Badging project. Besides helping the Alliance test the potential of this form of microcredentialing to serve our members, and providing some training on strategic foresight as applied to museums, I had hoped the course might generate some good content to share on this blog. And it has! This week’s post is a “story seed” created by CFM Council member (and test pilot) Angie Kim. This seed is the kernel of what could become a longer, more detailed story of what I think is a very plausible future.

Date of this scenario: 2025

Trends observable today, and a plausible future event, that could lead to this future:

Trend 1: Government support of social issues continues to decrease.

Trend 2: Private philanthropic support continues to underfund pressing social and humanitarian issues relative to personal-interest giving (such as for arts and culture, medical research, and higher education).

Trend 3: Triple bottom-line private enterprises continues to grow in number and in strength making corporations that operate for the social good both popular and commercially viable

Trend 4: Wealthy, young business entrepreneurs from the technology industries have emerged as leaders in the nonprofit sector, with an interest in applying capitalistic, entrepreneurial strategies to fixing social problems.

Event: All 50 states recognize triple bottom-line, social benefit corporations and yet-to-be-tested litigation uphold directors’ ability to prioritize social and environmental good over earning profits.

Story Seed: The Fourth Sector: 2025

Since the 1950s, the number of nonprofits in the United States has exploded, with well over 1 million 501(c)(3) public charities today. Despite this number, not all nonprofits and their issues are supported equally. The majority of private philanthropic support has gone to private-interest areas, such as elite universities, arts and culture, and medical centers, and not to helping the poor or to solving environmental issues (The Center on Philanthropy & Google, 2007). Exacerbating this problem is the unabated decline in government support for social issues. Consequently, the nonprofit sector is no longer seen as the space for solving social problems, such as poverty, hunger, homelessness and climate change. Instead, for-profit commercial enterprises that are incorporated as multiple bottom-line businesses have emerged as powerful agents of social change.

Although these businesses donate time and money to social causes, their charitable activities have far less impact than their enterprise ability to marry consumer spending with positive changes in such areas as sourcing of sustainable materials and humanitarian improvements in their production chain that protect natural resources and lift workers out of poverty. Commercial enterprises that unleash the power of capitalism on solving social problems has become so effective that new investment classes are being invented that further secure financial resources in this socially responsible marketplace. Unlike the nonprofit system that depended on the voluntary actions and behaviors of donors, the private enterprise market of consumers and investors are able to ‘move the needle’ on social issues like never before.

Here are five discussion questions Angie suggests you use to guide a conversation, in a museum or other organization, about this scenario and how it might inform your planning:
1) Is the nonprofit sector the best sector for solving social problems? Why or why not?
2) How should nonprofits respond to the evidence that the sector does not do enough to solve social problems?
3) How can nonprofits set aside their individual competitive needs in order to strengthen the overall sector’s ability to ‘move the needle’ on certain issues?
4) Is the emergence of commercial enterprises that operate for social good a positive or negative development for nonprofits? In what ways, and why?
5) In what ways might nonprofits be so shortsighted in their visions for the future that they miss the opportunity to be the leading sector for social change?

When Is the Nonprofit Sector Big Enough?

noreply@blogger.com (Anonymous) — Sat, 02 Nov 2013 22:26:00 +0000

I had the opportunity to read two opinion papers back-to-back that presented very different views of private philanthropy. The implications of their ideas raise big-picture questions about the purpose of the nonprofit sector. In her article “Plutocrats at Work,” Joanne Barkan described today’s philanthropic sector as contributing to an era of plutocracy—rule by the wealthy.

Mega-foundations are more powerful now than in the twentieth century—not only because of their greater number, but also because of the context in which they operate: dwindling government resources for public goods and services, the drive to privatize what remains of the public sector, an increased concentration of wealth in the top 1 percent, celebration of the rich for nothing more than their accumulation of money, virtually unlimited private financing of political campaigns. . . . In this context, big philanthropy has too much clout.

What troubled Barkan is that a minority of wealthy elites is tremendously influential in addressing large-scale social problems with no mechanism for them to be accountable to the populace. Consequently, decisions about how to resolve critical issues, such as in education, are not made democratically, but by those with money and concomitant power. Informal channels for accountability have been ineffective: The court of public opinion does not attend to the charitable activities of the wealthy, and journalists are unwilling to critically question private foundations (Feldman, 2007). Basically, there is no direct mechanism for the public—let alone the poor, the disenfranchised, and the underserved—to shape how the wealthy spend their money on issues that affect them. In short, there is no democratic say in how private philanthropists set or enact their agendas. Furthermore, what particularly galled Barkan is that taxpayers subsidize this undemocratic approach. Through tax deductions for charitable giving and tax exemptions for private foundations, we all enable a minority of wealthy individuals and their philanthropic institutions to become powerful in determining how our nation’s social issues are addressed without any accountability to the larger public.

Rob Reich’s[i] article “Philanthropy and Caring for the Needs of Strangers” presented a very different view, arguing that the American philanthropic sector actually performs, not undercuts, democracy. In prefacing his argument, Reich acknowledged that the nonprofit sector, including private philanthropy, is not effective in supporting or solving the needs of the poor. “Philanthropy appears to be more about the pursuit of one’s own projects, a mechanism for the expression of one's values or preferences rather than a mechanism for redistribution or relief for the poor.” He cited a Google-commissioned study by Indiana University’s Center for Philanthropy, which not only found that the minority of all charitable giving goes to those in need (only approximately one-third of all giving) but also that the wealthier the donor, the less they donate to issues concerning the poor. Given these findings, Reich concluded, “philanthropy is not much about caring for the needs of strangers.” But, Reich argued that the charitable sector was not intended to be a place to solve social problems and help the poor and, thus, these should not be the measuring stick against which to judge philanthropy. Rather, philanthropy and the subsidies to promote charitable giving are meant to encourage the wealthy to express freely their charitable impulses, not to solve social problems.

As I read Barkan and Reich's positions, the mantra ‘to do no harm’ was a constraint refrain in my head. No surprise as it has remained fixed after a decade of working at private foundations. This adage is the only explicit mechanism (albeit a voluntary and subjectively interpretable one) to invoke democratic accountability among grant making decision makers. Does one worldview—Barkan or Reich’s—result in more harm than the other? In considering this question, I thought of an article that has long been influential among arts funders—John Kreidler’s “Leverage Lost: The Nonprofit Arts in the Post-Ford Era.”

In this seminal essay, Kreidler described the birth of today’s nonprofit institutional model of support as it developed out of the arts. The arts in the United States looked very different up until the mid-twentieth century when modern-day forms of public charities and private foundations began to emerge. Before then, there were two kinds of ‘arts’—the high arts supported by the wealthy, such as museums and classical music, and the low, popular arts that competed in the commercial marketplace, such as vaudeville and comedy shows, radio programs, and dance halls.
Beginning in 1957, the Ford Foundation invented a new method of proliferating the high arts throughout the country. The foundation introduced the concept of short-term grants (commitments of no more than five years) that required a match of their funds. Not only did this proliferate the establishment and expansion of institutions of high art forms, but also the lure of Ford Foundation’s matching support transformed locally based people of means to become philanthropists and enjoy the prestige that came with it. In this way, Ford Foundation’s grant design introduced an institutional support model based on decentralization of support to local levels with resource dependency on no one funder, leveraging of dollars, and establishing, growing, and expanding non-commercial institutions.

If there’s any question of the success of this institutional support model, take a look around. In 1940, there were but 12,500 charitable organizations registered with the Internal Revenue Service (Hall, 2010). In 2010, there were nearly 1 million 501(c)(3) public charities out of over 1.5 million nonprofit organizations registered with the I.R.S. (Blackwood, Roeger, & Pettijohn, 2012). Public charities had revenues of $1.5 trillion and held assets of $2.7 trillion as of 2010 (Blackwood, Roeger, & Pettijohn, 2012). (For those curious about the arts, this sector accounts for about 10% of the total number of public charities.)

Before the mid-twentieth century, the institutionally based nonprofit model basically did not exist. Certainly there have always been charitable, voluntary, association-based efforts since the time of the Puritans, but these were a far cry from the complex, interconnected, and multi-faceted system that we now call the nonprofit sector. Consider that the annual revenues of U.S. public charities, in aggregate, is larger than the budgets of most governments around the world—larger than Spain, Russia, South Korea, India, and Hong Kong (if Wikipedia is to be believed).

So why am I recalling Kreidler to talk about Barkan and Reich? Taken together, these three essays paint a troubling picture of the nonprofit sector. The nonprofit sector, according to Kreidler, was designed to focus on institution building, with roots in elitist notions of the kinds of institutions that should be supported—arts, universities, specialized medicine. Also, the data tells us (Center on Philanthropy at Indiana University, & Google, 2007) and Reich acknowledged that what’s been built so effectively since the mid-twentieth century is a charitable institutional complex that better serves the interests of the wealthy than the basic needs of the poor. Moreover, as Barkan pointed out, taxpayers are underwriting the costs of avoiding solutions by subsidizing financiers of the nonprofit sector who are both undemocratic in their lack of accountability and ineffective at addressing non-elitist issues.

Having worked at and with a number of private foundations that are trying, truly trying, their damndest to make a positive difference, it’s hard to see this unflattering macro-picture. But, whenever foundation leaders defend the philanthropic sector, such as its tax exemption or its payout rate, they are reinforcing the very structures that have been, at its root, about realizing the interests of wealthy elites. And, same too of charitable organization leaders who, in their mission-driven focus on their own sector-specific issues, lose sight that the more money that flows into their sector at the expense of bolstering public coffers, the more resources stay within a sector that data and anecdote agree is unaccountable, not redistributive, and ineffective at realizing large-scale solutions. In other words, our shortsighted trust of our own nonprofit sectors has blinded us to the significant flaws that undermine addressing social and environmental problems. After all, each one of us is so good-hearted, how can we possibly be contributing to a system that reinforces inequities and undermines social change?

Most modern-day nonprofit institutions are less than 60 years old and federally recognized private foundations have been around for only 44 years. When will we assess the nonprofit sector’s limitations in solving social problems relative to other sectors’ abilities (i.e., public governments or private enterprise)? The nonprofit subsectors have regularly taken a protectionist stance in maintaining the status quo on charitable tax exemption levels, foundation payout, and estate taxes rather than give government more money. Certainly, such defense was necessary in order to develop this sector. But, are we at a point now when growing the nonprofit sector does more harm than good? Does continuing to fight for the nonprofit sector’s growth make sense today if we acknowledge that this sector is not effective at solving social problems, especially those that affect the most disadvantaged?

In no way am I saying we should dismantle the nonprofit sector or private foundations; after all, they provide a safety net and an essential infrastructure for charitable work to occur. Not only that, but public charities and foundations do exceptionally wonderful work. Consider that Rockefeller Foundation funding helped in the founding of historically black colleges and that Ford Foundation supported the establishment of the Urban Institute and the Center on Budget and Policy Priorities to cite three of innumerable examples of this sector's public good. I am merely questioning when is enough enough? Recent efforts in the commercial sector to develop their own structures to solve social problems, such as state-recognized benefit corporations, B Corp certification, and new investment classes of triple bottom-line businesses are examples of how the nonprofit sector is not being seen as a place to realize solutions. In addition, some private funders are becoming increasingly interested in funding non-501(c)(3)s, which is another indication that there are limitations to this sector. So I leave you with these questions. In what ways is the nonprofit sector now harming, rather than helping, us reach our mission-related goals? Should it still be our priority to preserve and grow the charitable institution complex? How can we align wealthy donors’ freedoms with meeting the needs of the poor? And, when should nonprofit workers and leaders channel resources to the best sectors able to solve social problems, no matter if it is in the nonprofit or not?

Works Cited

Barkan, J. (2013). Plutocrats at Work: How Big Philanthropy Undermines Democracy. Dissent Magazine.

Blackwood, A., Roeger, K. L., & Pettijohn, S. L. (2012). The nonprofit sector in brief: Public charities, giving, and volunteering, 2012. Washington, DC: Urban Institute Press.

The Center on Philanthropy at Indiana University, & Google. (2007). Patterns of household charitable giving by income group, 2005. Indianapolis, IN: The Center on Philanthropy at Indiana University.

Feldman, B. (2007). Report from the field: Left media and left think tanks--Foundation-managed protest? Critical Sociology, 33(3), 427–446.

Hall, P. D. (2010). Historical perspectives on nonprofit organizations in the United States. In D. O. Renz (Ed.), The Jossey-Bass handbook of nonprofit leadership and management (3rd ed.) (pp. 3-41). San Francisco, CA: Jossey-Bass.

Kreidler, J. (1996). Leverage lost: The nonprofit arts in the post-Ford era. The Journal of Arts Management, Law, and Society, 26(2), 79–100.

Reich, R. (2013). Philanthropy and caring for the needs of strangers. Social Research, 80(2), 517–538.

[i] Rob Reich often gets confused with another sharing a similar name, but the two could not be more different in their views of the nonprofit sector. This Rob Reich teaches political science at Stanford University where he co-directs the Center for Philanthropy and Civil Society. The other is political economist Robert Reich, who was former Secretary of Labor under President Clinton and now teaches at UC Berkeley.

Are Foundations too Focused on Themselves?

noreply@blogger.com (Anonymous) — Fri, 13 Sep 2013 20:13:00 +0000

The Center for Effective Philanthropy (CEP) just came out with a new report, “Nonprofit Challenges: What Foundations Can Do.” There were some dismaying findings. CEP’s survey of nonprofit leaders found that 52 percent felt that foundations are unaware of the challenges that nonprofits face. Less than 33 percent felt that foundations use their resources in ways that help nonprofits actually meet challenges. And, perhaps the most alarming finding is that nonprofit leaders felt more challenged to attract foundation support than any other kind of support. Survey respondents were nearly unanimous (99 percent) about the difficulty of attracting and maintaining (89 percent) foundation funding.

Today, there are well over 75,000 private foundations operating in the United States. Their tax-exempt assets total nearly $644 billion, of which they charitably spend approximately $3 billion each year (Foundation Center, 2012). With such largess and numbers, one wouldn’t imagine that foundation funding would be so hard to come by. Given how many foundations exist and CEP’s findings that nonprofit leaders find foundation grants the hardest to get, there is obviously a sharp disconnect between supply (foundation support) and demand (nonprofit financial need). So, what accounts for this disconnect? I would argue that the nonprofit economy is inherently dysfunctional, and one main reason is that private donors (individual philanthropists and foundations) behave as if the nonprofit economy is like a capital marketplace. Just like they behave in the for-profit economy, donors make emotion-based decisions, and foundations, as charitably focused as they are, are better suited to serving internal priorities than the needs of nonprofits. As a result, nonprofits that are set up to address issues and problems that could never be supported in the for-profit marketplace still find themselves underserved in the nonprofit sector. In other words, funders of nonprofits don't prioritize the very things that were intended to be addressed in the nonprofit system.

Albeit incorporated as a nonprofit entity, foundations behave like any other consumer in the marketplace (i.e., their giving behavior is like that of irrational private donors or bottom-line focused corporate investors) because of foundations' history, ideological roots, and, ironically, their own pursuit of excellence. Consider the following:

Firstly, foundations are inherently self-serving. When the private foundation entity was established by the Tax Reform Act of 1969, foundations were asked to do only one thing, which was to behave charitably. Regulation of private foundations was necessary at that time because wealthy nonprofits were being incorporated as a way to avoid estate taxes and as an instrument to maintain control of wealth. To counteract this, the IRS specified that private foundations must use their funding for charitable purpose and not for personal inurement. Outside of this requirement, however, government never went so far as to intrude on foundation ‘owners’ freedom of expression, with the result that today’s foundations prioritize the wishes (and whims) of donors over social needs. This historical backdrop helps explain the oddity of foundation culture: There are so many foundations that do wonderful things for the public good, but their individuality, which is rooted in the privilege of free expression, makes this sector seem incoherent, uncoordinated, and idiosyncratic in how and what they support.

Second, in order to maintain the sanctity of foundation ‘owners’ (donors, founders, trustees, executive leadership) wishes and intentions, foundations maintain a highly ritualized process for identifying, vetting, reviewing, and deciding on which nonprofits to support. This is called the due diligence process. Anyone who has been a grantmaker will appreciate that this time- and resource-consuming process has its merits. After all, with so many nonprofits and projects to choose from, funders need to be sure that they are supporting the best projects over any others. Foundations’ careful vetting and review process are useful in protecting foundations’ objectives; however, the downside of all this is that nonprofits are at a disadvantage and waste too much financial and human resources going through this process. At what point is the sanctity of upholding a foundation’s vision worth the harm it causes in the nonprofit field?

Third, the specialized practice of foundation strategic planning has done much, I would say too much, to prioritize the primacy of a foundation’s objectives. Consider that a foundation’s strategic planning process is considered a finished success when trustees feel that their plan is a unique reflection of their combined interests and visions. (This is why having a diverse and community-based board is so important.) To the detriment of society, however, too little time is spent on the needs of the field. Oftentimes, when a survey of grantees is conducted during a foundation’s strategic planning process, the results of such a scan are used to inform the tactical, and not strategic, level. In other words, any input from the field is secondary after addressing the needs and wants of the foundation board. Consequently, foundation support better reflects the lifestyles, entrepreneurial practices, and ideologies of the wealthy than the needs of society’s most underserved. (To this point, research studies have confirmed that foundations are not redistributive to the poor and that they reinforce class divisions [Center on Philanthropy at Indiana University & Google, 2007; Odendahl, 1990; Ostrander, 1984; Ostrower, 1995; Silver, 2007].)

Fourth, foundations spend an inordinate amount of time and money on assessments that are more about their own internal operating and managerial concerns and less about their impact on grantees’ capacity to realize social purpose. I looked up the number and type of assessment tools that exist today for foundations on Foundation Center’s TRASI database (Tools and Resources for Assessing Social Impact). (A wonderful, yet underutilized, resource, by the way.) There are more than 60 tools specifically designed for foundation assessment, and nearly all are meant to help foundations answer questions about their own internal operating or managerial performance. For example, CEP’s Grantee Perception Report helps to gauge a foundation’s customer service as an indicator of performance. The Wallace Assessment Tool assesses if grantees fulfilled their project objectives: In other words, did grantees make good on their promises to funders? That so many foundation assessment tools now exist speaks to the fact that foundations are seriously interested in their performance, which is a good thing. The downside though is that these tools are internally focused and do not attempt to answer how foundation funding helps grantees. With all this energy spent on foundation performance, it's a wonder that the more fruitful and challenging pursuit of answering how foundations actually help nonprofits remains under-developed.

In case you’re curious, here’s a selection of foundation assessment tools available, which can be found using TRASI on the Foundation Center website.

· A Guide to Actionable Measurement (Gates Foundation)

· Application Perception Report (CEP)

· Ashoka Measuring Effectiveness Questionnaire

· Balanced Scorecard (New Profit, Inc.)

· Benefit-Cost Analysis (Abt Associates)

· Benefit-Cost Ratio (Robin Hood Foundation)

· Building a Performance Management System (RootCause)

· Building Future Leaders Diagnostic Survey (Bridgespan)

· Capabilities Profiler (Keystone Accountability)

· Charting Impact (Independent Sector, BBB Wise Giving Alliance, & Guidestar)

· Checklist for Reviewing a Randomized Controlled Trial (Coalition for Evidence-Based Policy)

· Community of Learners (TCC Group)

· Comparative Constituency Feedback (Keystone Accountability)

· Compass Index Sustainability Assessment (ATKisson Inc)

· Core Capacity Assessment Tool (TCC Group)

· Criteria for Philanthropy at Its Beset (NCRP)

· Developing a Theory of Change (Keystone Accountability)

· DevResults (CaudillWeb)

· Evaluating the Impact of Development Projects on Poverty (World Bank)

· Evaluation Plan Builder (Innovation Network)

· Evaluation Principles and Practices (Hewlett Foundation)

· External Review of Program Strategy (Duke Foundation)

· Foundation Performance Assessment Framework (Irvine Foundation)

· Foundation Scorecard (RWJ Foundation)

· Foundations of Success Guideline for Effective Evaluation (Foundations of Success)

· Framework for Program Evaluation (CDCP)

· Grantee Perception Report (CEP)

· Impact Reporting and Investment Standards (GIIN)

· Learning for Results (GEO)

· Learning with Constituents (Keystone Accountability)

· Measures of Success (Foundations of Success)

· Multidimensional Assessment Process (CEP)

· Operational Benchmarking Report (CEP)

· Organizational Assessment Tool (Innovation Network)

· Outcome-Based Evaluation (Organizational Research Services)

· Program and Policymaking Evaluation (Kellogg Foundation)

· Project Streamline Grantmaker Assessment Tool (CEP & GMN)

· Prove It! (New Economics Foundation)

· Pulse (Acumen Fund)

· Social Audit (Social Audit Network)

· Social Impact Assessment (Rockefeller Foundation & Goldman Sachs Foundation)

· SROI (The SROI Network, and many others’ proprietary SROI tools)

· Staff Perception Report (CEP)

· Stakeholder Assessment Report (CEP)

· Success Measures Data System (Neighbor Works America)

· Readiness for Organizational Learning and Evaluation Instrument (FSG)

· Theory of Change Community (ActKnowledge)

· Trustee Evaluation Toolkit (FSG)

· Wallace Assessment Tool (Wallace Foundation)

I took the time to type this list (and nearly wore down my fingers) from the TRASI site to point out that the foundation sector really has an embarrassment of riches when it comes to assessment instruments, guides, and tools. In the context of CEP’s newest findings, what becomes clear is that foundations are fixated on their internal objectives and not enough on the needs and objectives of the nonprofits they are supposed to serve.

Don’t get me wrong. I am excited that so many foundation tools exist because I really value foundation evaluation: There is nothing more exciting than combining program strategy and evaluation wherein clues of funding outcomes, intended or accidental, provide a way of improving grantmaking interventions. I've mined for ideas in many of the tools listed in TRASI because I am personally interested in advancing grantmaking practice. But, given what nonprofit leaders are communicating via the CEP report, I am also cognizant that foundations’ pursuit of their own excellence has hurt nonprofits. All this innovation in improving foundation performance has had a significant downside. While foundations have evolved increasingly sophisticated, professional practices, this field’s focus on its own objectives has resulted in skirting the question of how foundations are actually helping and serving public charities and, by extension, society’s needs and demands. Until foundations spend just as much time innovating in that direction, too many nonprofit leaders will feel like beggars than deliverers of society’s salvation. There is tremendous opportunity now for foundations to strike a new approach that incorporates social need and nonprofit concerns earlier and with more urgency in foundations’ planning, evaluation, management, and operational practices.

Works Cited

Buteau, E., Brock, A., & Chaffin, M. (2013). Nonprofit challenges: What foundations can do. San Francisco, CA: Center for Effective Philanthropy.

Foundation Center. (2012a). FC Stats: Number of grantmaking foundations, assets, total giving, and gifts received, 1975 to 2010. New York, NY: Foundation Center.

Odendahl, T. (1990). Charity begins at home: Generosity and self-interest among the philanthropic elite. New York, NY: Basic Books, Inc., Publishers.

Ostrander, S. (1984). Women of the upper class. Philadelphia, PA: Temple University Press.

Ostrower, F. (1995). Why the wealthy give: The culture of elite philanthropy. Princeton, NJ: Princeton University Press.

Silver, I. (2007). Disentangling class from philanthropy: The double-edged sword of alternative giving. Critical Sociology, 33(3), 537–549. doi:10.1163/156916307X189013

Nonprofit Membership Associations: Serving Members Today or Shaping the Field for Tomorrow?

noreply@blogger.com (Anonymous) — Sun, 04 Aug 2013 22:55:00 +0000

As the nonprofit sector has had to shift in response to 'small government' by diversifying revenues and responding to greater social needs, there is one type of nonprofit entity that has remained largely overlooked as a potential change agent. I’m talking about membership associations that support groups of nonprofits unified by a common geography, type of entity, or cause.

What make membership-based intermediary organizations so important are the same reasons that they are not that exciting to talk about: Membership associations are the glue connecting the people that comprise the nonprofit sector together; they are a primary piece of infrastructure that enables the sector; and they are the ‘institutional memory’ of their fields helping to retain past knowledge while ramping up new professionals. In fact, researchers have attributed the “carrying capacity” of a community’s nonprofit sector (i.e., how many nonprofits a community can sustain) to how well a community has developed an infrastructure of “network exchanges” (Paarlberg and Varda, 2009). In other words, yes, nonprofits need money, but if you want to see results, take a look at how well nonprofits are networked. A nonprofit working in isolation is less capable of realizing its mission than one that is connected to others.

An intermediary, membership-based association's primary function is to provide services to its members. But these institutions can do much more than just respond to where their members are now. These organizations, because they are so well connected and influential, are well poised to deliberately shape the future of their respective sectors. Unfortunately, too often, they remain in the nonprofit background as they quietly focus on serving their members than on actively shaping the field. For instance, if membership associations continue to focus on issues that are most pressing for the majority of their members, then marginal but critical issues remain overlooked, such as support for affordable health care by those outside of the health sector, or changing copyright laws to unfetter creativity by those in the arts, or pushing for a common grant application no matter how unpopular this idea among individual members. In other words, there are a whole host of issues that need to be brought to the forefront for the good of all, and membership associations can either take up issues based on popularity among their membership—a service-based, reactive approach—or take a stand on the importance of unpopular issues that benefit the sector as a whole—a leadership-based, proactive approach. There is, of course, good reason why membership associations are not often at the forefront of change: Focusing on service ensures that dues-paying members are satisfied, while exerting bold leadership risks disenfranchising members.

To paint a picture of the distinction I'm talking about, I’ll share two examples of leadership-based changes that took place fairly recently at membership associations. The first occurred when I was vice-chair of Grantmakers in the Arts (GIA). We had a problem with a particular practice of grantmaking—the kind that ‘hollows out’ nonprofits with grant amounts that do not cover the full operating costs of implementing a funded project. For years, many in the field (notably, Nonprofit Finance Fund, Center for Effective Philanthropy, and Grantmakers for Effective Organizations) discouraged the practice of under-funding grantee organizations. But, as a board, we felt unready to ‘pick a side’ on any specific grantmaking practice; we did not want to disenfranchise members who felt they had their own good reasons for not providing general operating support or honoring application request amounts in full. For years, our softball approach was to educate members on this issue and avoid favoring any particular grantmaking practice. Ultimately, GIA picked a side, and what made us ready to be bold about our opinion was a conflation of new executive leadership, the Economic Recession, and common experience among board members on what constitutes beneficial grantmaking practices. GIA boldly communicated that undercapitalizing public charities is bad practice—public charities not only need enough money to cover the entire cost of a project but also enough to build a financial surplus to weather emergencies and afford opportunities. GIA leadership made capitalization of public charities a conference theme, commissioned research on capitalizing nonprofits, and continues to convene regional workshops on this topic. Sure, there was some complaining about how GIA was telling its members what and how to do grantmaking, but nobody dropped their membership. Most notably, GIA's influence on so many arts funders effectively pushed this message out: Today, arts nonprofits all over the country are recognizing the business enterprise aspect of their work, are working to retain surplus, and are having conversations with their funders about the real costs of projects. Looking back, it seems like such a ‘no duh’ proposition to champion a healthy grantmaking approach, but for an association that makes its living on holding onto as large and diverse a base of members as possible, this was not an easy decision. But, after more than a generation of grantmaking, certainly this sector should be improving its grantmaking practices, and a membership association of grantmakers was an ideal vehicle for pushing for better practices.

Another organization that exerted its leadership in the field is American Alliance of Museums (AAM). At a time when support for the arts and its institutions are under constant threat of defunding, the association wanted to be more influential in speaking on behalf of museums to politicians and the public. However, AAM was limited by the fact that their membership did not include all museums. Like so many membership associations, its membership reflected the participation of the ‘biggies’—well-known and/or large institutions, and less so the more numerous small-budget ones. This limitation meant that AAM could not, with any integrity, advocate on behalf of the entire museum sector when its membership was but a fraction of the population. Hence, AAM threw out and re-wrote their membership dues structure. That’s right: Instead of a simple update to their earned revenue model, AAM re-conceived it anew, which had significant financial implications. Before, to become an AAM member, a museum had to pay some amount of dues. Now, all museums—every single museum in America— are automatically a basic-tier member under a pay-what-you-can arrangement. This means that even if a museum pays $1, it is still a member. (All those wanting higher levels of service pay at more traditional dues levels.)

This dramatic change in dues structure does not just impact AAM financially (e.g., what if every museum wants membership essentially for free?!); it fundamentally affects decision-making by reminding its governing body that decisions must now be made on behalf of ALL museums, not just dues-paying members. This shift is embodied in their concurrent name change from the American Association of Museums to American Alliance of Museums. The former spotlights its function as an association of only its members; the latter calls attention to its new role in unifying the entire sector and connecting with partners. In addition, what AAM’s name change signified is that member-serving associations should think more about strengthening their sectors by finding common ground, rather than specializing and distinguishing themselves and their members as so different and unique. The former creates unity while the latter promotes fragmentation.

For funders, it’s bold moves like these by membership associations that need to be supported. This is the kind of experimentation and potential innovation that is widely needed, but is also very expensive. It’s terrifyingly risky financially to possibly disenfranchise members or re-write your entire earned revenue model. Membership associations hold tremendous promise for advancing the nonprofit field in their role and function as educators, modelers of behavior, and the connective tissue unifying so many individual organizations. Member-serving intermediaries have not been the first place funders turn to for innovation in the field but, they should be, especially if they have the kind of visionary leadership that can compel change throughout their sectors by moving their members forward.

Work Cited:

Paarlberg, L. E., & Varda, D. M. (2009). Community Carrying Capacity A Network Perspective. Nonprofit and Voluntary Sector Quarterly, 38(4), 597–613. doi:10.1177/0899764009333829

Finally! Transforming Grant Reports into Useful Data

noreply@blogger.com (Anonymous) — Sun, 21 Jul 2013 06:04:00 +0000

How many of you have heard this request: "Hi, there! How's it going? I know you're busy with that convening tomorrow, but can you send me any relevant data on the impact of our funding? I need it by the end of this week for a presentation...board meeting...foundation newsletter. Thanks!" You know the drill. Today's foundation program staff's job descriptions are expanding to include the ability to make grants that have a measurable impact. Inherent in that responsibility is your ability to collect and analyze outcome-related evidence: How do we know that our grants are having an impact? How is our support helping (or not)? What have been the effects of our grants—planned or unplanned? If these are your set of evaluation questions, this thought has likely also crossed your mind: How do I make sense of all the information from site visits, phone calls, conversations with the field, and grant report documentation (videos, narratives, studies, articles)? I know that we're having an impact, because I hear, read, and see it, but when it comes to collecting it for a report, it's hard to know where to start!

Oftentimes, this material sits in a cabinet until an evaluation opportunity comes up when, more likely than not, the consultant asks you for all this material. Or, maybe you’re one of the lucky ones who actually has an evaluation expert on staff to manage all this information. Either way, an under-recognized software tool that foundations should consider using is data analysis software. This software should be considered just as essential as your grants management software. In this post, I’m going to describe how to get started with one data analysis software called Dedoose. I’m definitely not getting paid to promote them (they don't even know I exist), and this is really just an opportunity to share my positive experience with this product.

To start, data analysis software is a tool that can be used to analyze information that you have locked up in volumes of grants reports. These software (and there are many competing products) are often used by researchers for statistical data analysis in quantitative research and/or for qualitative research to organize and identify patterns in text-, visual-, or oral-based materials. Given that the primary users of data analysis software are scientists, most are pretty technical, not very user friendly, and not cheap. I’ve been using NVivo (for qualitative) and SPSS (for quantitative), and they take a while to learn how to use, which is a reason why such products don’t get picked up outside of academia or research work. When I first encountered Dedoose, I was really impressed. I had a Eureka! moment when I first used it, because it was just so darn easy to use and holds so much promise for making all that grant report content (there's probably miles of it stacked in cabinets all across America) actually become relevant to outcome-focused work. What grantees don't realize is that their reports sit in cabinets not because of a lack of interest, but because it's 1) overwhelming to go back to them after an initial reading because there's just so many, and 2) it's difficult to transform the information into usable data without involving a lot of work. This is why program staff might have favorite writers to return to time and again when it's docket report-writing time or may keep a running document of good quotes that they update--both pretty spotty and clunky efforts.

I promised a colleague that I would help set up the technological infrastructure of their grantmaking program to operationalize their evaluation process. In other words, I am helping them organize their grant reports and other material evidence of grant impact so that they can pull up stories and documentation of their grant effects easily. So, instead of writing a procedures document just for them, I’m using this opportunity to share this with all of you.

Some notes about Dedoose and what I will and won’t cover. Dedoose is web-based, which I love because it allows program staff to access the materials from home or office or wherever and can be shared via the cloud with co-workers. But, for those of you whose foundations haven’t yet tackled what it means to place grant materials on the cloud, be sure to discuss that policy-level question first before subscribing. (I will point out, however, that much scientific data is sensitive in nature, such as for studies of adolescent behavior, incarcerated study subjects, and the like. Dedoose was built to protect your data to the utmost, but check it out for yourself.) As for what I will and won’t cover, Dedoose does a great job providing instructions on how to use its software, so I will assume that you will refer to their video presentations for instruction. What I will supplement is how to apply Dedoose for grant-related materials. I have made up a narrative grant report as my example for how to use “descriptors” and “code,” which can be applied to include video uploads (e.g., if your grantee CEO was interviewed on CNN and you want to store and code it for evaluation-relevant content). So here we go…

To start, let’s create the scenario. You are an environmental program officer working on two portfolios—healthy rivers and alternative fuels. In your healthy rivers portfolio, you have a cohort of grantees who are all part of a 2010-2013 multi-year funding cycle of advocacy-based organizations. In this portfolio, you just received an interim grant report from the fictitious Happy Earth Network, which received a three-year grant of $300,000. In it, they described what they accomplished in 2012 because of your funding. They are super excited about the many objectives they met.

Now, dust off your foundation or program’s Theory of Change. Huh, you say? Hopefully, if done well and relatively recently, it will provide you with exactly the kind of information that you need to look for in order to assess if your grantmaking is on track. You don’t have to have it but it does help, especially because a Theory of Change should reflect the expectations of key foundation stakeholders (i.e., your co-workers, boss, and board). When you start analyzing your data, you want to make sure that what you analyze is of relevance to others, not just you. Here’s what you need to pluck out from your Theory of Change (or here’s what you can ponder in the absence of one):

What are the objectives of my program’s funding? In this case, let’s say your program’s objective is to restore native salmon runs by dismantling dams in rivers where the environmental and social costs exceed the economic benefits.
What should I be looking for to know if objectives are being met? You should have several indicators, so let’s use three as examples of outputs, outcomes, and impact. Output: Using your grant, grantee hires a communications director to sway public opinion in favor of dam removal. Outcome: Dam is removed. Impact: Salmon populations achieve sustainable levels in dam-removed watershed.
What indicators should I be looking for? Achieving more than output-level results is challenging, so you need to track the indicators of trends moving toward (or away from) hoped-for outcomes and impacts. Given the three levels of objectives listed, here are some examples of indicators: Output-level change indicator: Number of Happy Earth Network’s Facebook followers climbs to indicate public recognition; Outcome-level change indicator: Grantees report swaying politicians to their side; Impact-level change indicator: Scientifically commissioned report shows salmon runs are re-appearing.

So, back to Dedoose. The first thing you want to do is to think about how your stakeholders will want to slice and dice the data based on organizational or grantmaking categories. Dedoose calls these “descriptors.” Will you need to demonstrate how a particular grantmaking portfolio is doing? Is your foundation starting to expand its grantmaking to include, for instance, minority-led organizations? Think about what information you might want for foundation communications: Maybe this year’s annual report will showcase grantmaking in rural communities. In other words, anticipate how you want to categorize your grantees. These categorical buckets will enable you to organize and call up the data based on grantees’ demographic, organizational information. For this example, let’s say that these categories are: ID #(this should be the same identifying number you use in your grants management and files), Grant Program (Environment), Grant Portfolio (Healthy Rivers), Cohort (Healthy Rivers-Advocacy Building), Grant amount ($300,000), Budget Size ($2 million), Org Founded (1995), Organization Name (Happy Earth Network), Minority-Led (yes—Happy Earth Network is led by a Latina), Location of Grantees’ Office (Montana).

Next, return to your Theory of Change and look at your indicators. These are, according to Dedoose, going to be your “codes.” Now coding is a big deal. It’s the most important reason why you would turn to data analysis software in the first place. Making up precise, targeted, and relevant codes is what will enable you to call up useful grant report content and transform a 15-page narrative report from Happy Earth Network into a powerful data source. Being able to quickly pull up relevant data, which has been separated out from a lot of stuff that you don’t need, will help you generate communications content, write to-the-point docket reports that are enlivened with relevant grantee quotes, and be ready to analyze the coded content to spot trends, gather evidence of the trends, and analyze trends. In turn, all this will help you distribute more targeted, responsive grants and discern if your grantmaking strategy needs to change in order to better reach your objectives. When I’ve used codes to look for problems in grantmaking approach, that docket report section pretty much writes itself when I see the relevant data excerpted from grant reports on that topic.

I suggest starting with the following as broad categorical codes to start: (a) grant impact on organization and/or its staff, (b) the organization’s impact on the field, audiences/public, and/or influentials, (c) challenges that grantee is facing, (d) grantee suggestions for improving your foundation's grantmaking, (e) grantee's praise of your foundation/board/staff, (f) board/boss-specific information, (g) quotes that can be used for communications and docket reports, and (h) items to monitor. Code names should be concise, so just use "monitor" instead of "items to monitor."

The codes you select are also quite personal and should reflect the character, interests, and objectives of your foundation. Let's pretend that an interest in youth is consistently shared across all your foundation's grantmaking programs, so I've used the code "youth impact" for examples of impact on youth.

Keep in mind, codes should be meaningful enough that everyone in your foundation is applying the same codes consistently. (Note, Dedoose allows individual users to review their coded work so they can compare their coding work with others, which will help avoid inter-reliability issues.) Ultimately, you want just the right amount of codes to find the information you need--not too broad that they bring up meaningless data, not too fine that the information you want doesn't come up, and not too many that you're overwhelmed by codes.

Here’s an example of coding Happy Earth Network’s interim grant report. You can see the codes I made up in the bottom right box labeled “Codes.” In the large field is the grant report. I thought that these two sentences, which I highlighted and then made into an "excerpt," indicate how Happy Earth Network used their grant, is affecting public perception, and is exciting youth attention to their cause. Hence, I assigned the following codes: "impact on grantee," "youth impact," and "grantee's impact." You can assign as many codes as you like to your selection. The idea is that every time you want to generate a report of all content that was assigned a code, such as "impact on grantee," only this content will be gathered and displayed together, with all other content filtered out.

Here's another example: I selected these sentences (highlighted in green), which are about Happy Earth Network's current organizational challenge (they have a hard time retaining scientists in their rural, low-paying community). At some point, when I want to review all the different kinds of challenges my grantees are facing, I can generate a report of just those selections coded "staff challenge" to analyze for any trends. I also coded this same selection "monitor" to remind me that I want to follow up on how Happy Earth Network is doing with hiring and retaining skilled staff.

And, here's what the document looks like when I'm done coding. Notice that some sentences don't get any coding at all, while others (as in the examples above) got one or more codes.

It looks quite messy, but you'll never need to look at this document in this state again. (If you want to read original grant reports, remember that your grants management system is the best place for managing and reviewing this kind of material. Data analysis instruments are just for analyzing the content.) Upon coding, you can forget about reading this grant report in this long narrative format. You, or your program associate, just read it in order to code it--now you just want to be able to call up the relevant bits. As an example, let's say you want to review only information that is relevant to how your grantmaking affected your grantees. Remember you have a code for this, so you can export all data coded "impact on grantee." Here's an example of how Dedoose exports this information (you can export it as an Excel or Word document--either one makes it easy for you to cut and paste for your report writing).

I've only coded one organization in this example, Happy Earth Network, but if we had other grantees' reports, their data would also come up under this code assignment. Keep in mind that you can upload and code not only grant reports, but also your site visit notes, transcripts of recordings, reviewers' notes, media coverage--anything that can be selected as text for you to assign codes. Also, remember your descriptors? You can apply a filter for only those types of organizational characteristics you want to examine. For instance, you can review the codes of only organizations in your grant portfolio (1st descriptor) that are in the current cohort (2nd descriptor).

You can use Dedoose as an individual program officer, or this tool can be used throughout the foundation. There's healthy competition in the world of data analysis software, trying to make them easier and more powerful to use. A couple years ago, when I didn't know about Dedoose, I would never have suggested using data analysis tools for nonprofits, unless they were actually doing social science research and high-end evaluations. But, I stumbled on Dedoose for a project and found out first hand how they made this sophisticated program easy to use for any social change-oriented organization. What I love is that you can upload and code just about anything text or video based, it works on a Mac or PC, and it's remotely accessible as it is web- and not desktop-based. Dedoose will help you track, organize, and discern evidence of impact. So the next time you're asked for data about how your foundation's grantmaking is affecting your grantees or the field, you can say, "I can have it to you today!"

Is Criticizing Private Foundations Anti-Capitalist (i.e., Marxist) or Pro-Capitalist?

noreply@blogger.com (Anonymous) — Tue, 16 Jul 2013 18:22:00 +0000

Working on a dissertation that seeks to address empirically the notion of private foundation effectiveness, I’ve been struck by two things: the lack of critical inquiry on this topic and how criticism of foundations has been stifled. On the first point, of course, people pontificating and expressing their opinions have spilled lots of ink, but much of this is subjective and reflects ideology not facts. Certainly, personal expressions by those knowledgeable about the field can be useful, but without including a critical, discourse-dependent approach to inquiry, conversations about private foundations neither become increasingly sophisticated nor elevated beyond a shouting match. This lack of scholarship is a far cry from my other academic experience, which was in art history, which I can’t help but use as a comparative foil. In my graduate studies in art history, I was bombarded with criticism—discourse on identity, how we perceive, and the notion of power and otherness. As frustrating as it was to be reading semiotics than visiting a museum, I appreciated being able to move beyond appreciating art on the basis of personal aesthetic pleasure to understanding the construction of meaning that says a lot about who we are as a people.

In building my literature review of private foundations, there is very little critical study of its effectiveness. Hence, in the absence of empirical data, I’ve been mining references for different ways in which people have critically analyzed foundations, particularly around the notions of accountability and effectiveness. In that process, I found something interesting that has no room in my study, so I’ll talk about it here instead. There’s something odd and disturbing in how people treat those who criticize private foundations.

There seems to be two kinds of treatment of people who express any kind of criticism of private foundations. One kind of reaction is to accept their criticism and laud the person for being an important voice in the field. These folks are perceived as being an intellectual scholar or enlightened leader: They are warmly invited to circulate among foundation board trustees and to speak at foundation-only conferences. Joel Fleishman (2009) falls into this camp as do many foundation CEOs and presidents who express self-critical opinions, such as “we need to do more” and “this is not our money.” When I consider why these folks are so well received within the private foundation community, it’s because they are moderate in their ideas of what foundations should be doing. Instead of calling for increased regulation, such as increasing taxes on private foundations or increasing the payout floor beyond 5%, they ask foundations to self-regulate their giving to give more to the poor, consider sunsetting, and be less secretive and more transparent. The bottom line is that their recommendations stop short of increased governmental regulation and do not upset the general social order. Take, for example, Fleishman (2009). In the same book in which he suggested that foundations should pay out more and that more foundations should sunset, he is also quite firm on the point that foundations have the Constitutional “right to disburse [funds]” in any way they choose (pp. 15-16). This “autonomous” right to freedom of grantmaking is a position that has a large following, reflected in the membership of Philanthropy Roundtable. (I may return to this topic later, as there’s also interesting going-ons with those who believe that foundations should be considered as having tax immunity (freedom from government) than tax subsidy of helping re-distribute wealth [see, for example, Reid, 2013].)

This type of critic does not upset any apple carts and, in fact, makes the case for why those in power should stay in power: Elites still get to be elites, and their ability to self-initiate any improvements in charitable practice depends on them staying in power. This notion of philanthropic elites is an important notion well established by a body of research generated by a group of smart women whose names, coincidentally, all start with “o.” Odendahl (1990), Ostrander (1984), and Ostrower (1995) studied the elites and found that their participation on nonprofit boards and their charitable giving reified their elite status, placing them in a social circle of other elites and reinforcing class divisions between high and low.

The other type of response to critics of private foundations is to accuse them as being a Marxist enemy of capitalistic and, hence, undemocratic. Take, for example, Fleishman’s criticism of Roelofs’s (2003) book “Foundations and Public Policy: The Mask of Pluralism.” Fleishman warned: “There is a small body of Marxist-oriented scholarship about foundations, much of it politically marginal and factually shaky” (cited in Van Til, 2008, p. 124). I’m both discouraged and ashamed that such a revered foundation scholar like Fleishman takes to dismissive name calling (come on, can’t we have an intellectual debate without accusing people of being a sickle-wielding communist?).

Roelofs’s work has as much of an important place on foundation executives’ book shelves as Fleishman’s works do, particularly among funders who want to redress social inequities and not inadvertently re-institute them. Roelofs (2007) perceived private foundations through a critical lens of power and social inequities (listen up all you social justice funders!). She contended that private foundations reinforce the existing social order “promoting consent and discouraging dissent against capitalist democracy” (p. 480). For example, intellectuals who are disenfranchised by the existing social order and want to promote change often find an outlet in being employed within the nonprofit sector, such as private foundations. (This pretty much describes every smart, value-forward program officer I know.) By being employed in an industry that depended on capitalism for its success, these folks are quieted by their involvement in these civil society entities, which exerts a cooling effect on the possibility of a revolution that fights against the established hegemony (Roelofs, 2007). (Hmm, maybe Egypt’s best way to stymie revolution is to proliferate its own civil society institutions!) Roelofs (2007) posited that the United States is without the kind of protest movements that marked the 1960s and 1970s because of philanthropic institutions that exert social control: “Radical activism was often transformed by foundation grants and technical assistance into fragmented and local organizations subject to elite control” (p. 485).

Does Roelofs sound like a revolutionary manifesto? Not to me, but that may be because I’ve felt personally the cooling effects of working for private foundations. Any program staff member who has worked for many years in a foundation (after the stars have fallen from their eyes) would likely find Roelofs’s message to be a no-duh, not a polemic. (Yes, working for foundations does provide wonderful opportunities to make change, but I’ll talk about those in another post.) There have been moments when low levels of wealth redistribution, which make no dent in addressing the gross inequalities and inequities in society, frustrated me. A concrete example of this is foundations’ efforts to pay out only the bare-minimum amount of 5% distribution of assets rather than give away more money to truly try and fulfill their missions. Hence, I welcome Roelofs's contribution to the literature, which helps funders be more enlightened about and effective in attempting to redress inequities--an effort that is directly in line with creating a more democratic society.

In the last decade, there has been a renewed effort for ‘social justice philanthropy’ to try and solve inequities of resources, opportunities, and power. For those of you in that camp (and anyone else), you may be interested in learning more along the lines of what I’ve written about here. This line of thinking about how foundations reflect or fight the negative effects of capitalism is important because it helps illuminate how your foundation may be accidently complicit in re-enacting injustices. The learning from these writings is the intellectual basis for how your foundation can ‘move the needle’ permanently in your funding, rather than ‘move the needle’ temporarily as so many foundations do. There is a still-too-small body of writing that critiques private philanthropy but for more, start with Robert Arnove’s writings in the 1980s. He pioneered thinking about ‘liberal’ foundations that tried to fight inequities but actually ended up re-enacting socio-economic systems in grantmaking that corroded democratic accountability in decision-making. See also the special May 2007 issue of the periodical “Critical Sociology” critiquing private foundations, which includes an article by Feldman (2007) who attests to Arnove and Roelofs’s contentions by describing how progressive journalists and nonprofits avoid scrutinizing private foundations inadvertently because of subservience to private foundation funding.

Works Cited

Feldman, B. (2007). Report from the field: Left media and left think tanks--Foundation-managed protest? Critical Sociology, 33(3), 427–446. doi:10.1163/156916307X188979

Fleishman, J. L. (2009). The foundation: A great American secret; how private wealth is changing the world. New York, NY: Public Affairs. Retrieved from http://books.google.com/books?hl=en&lr=&id=fR4IYOB9RUsC&oi=fnd&pg=PR7&dq=joel+fleishman&ots=-MY11uDRS7&sig=EK3oDOsPzDS7qq4ua7EtgRQyInA

Odendahl, T. (1990). Charity begins at home: Generosity and self-interest among the philanthropic elite. New York, NY: Basic Books, Inc., Publishers.

Ostrander, S. (1984). Women of the upper class. Philadelphia, PA: Temple University Press.

Ostrower, F. (1995). Why the wealthy give: The culture of elite philanthropy. Princeton, NJ: Princeton University Press.

Reid, A. (2013). Renegotiating the charitable deduction. The Exempt Organization Tax Review, 71(1), 21–31. Retrieved from http://www.philanthropyroundtable.org/topic/philanthropic_freedom/a_boundary_to_keep

Roelofs, J. (2003). Foundations and public policy: The mask of pluralism. State University of New York Press.

Roelofs, J. (2007). Foundations and collaboration. Critical Sociology, 33(3), 479–504. doi:10.1163/156916307X188997

Van Til, J. (2008). Searching for critical issues in philanthropy. Nonprofit Management and Leadership, 19(1), 123–128. doi:10.1002/nml.209