12.31.11
Posted in Uncategorized at 7:32 pm by Administrator
As I indicated in my first post, this blog focuses on the relationship between funders and grantees. Today I want to look at a specific bequest and raise some thoughts and questions about it as a way to illuminate some factors that, in my view, undercut the performance of the nonprofit sector.
Here is a recent announcement by The Community Foundation of Greater New haven (Connecticut):
New Haven, CT (December 15, 2011) – The Community Foundation for Greater New Haven, the region’s largest grantmaker and permanent endowment, announces that the late Richard English has made a $20,024,640 bequest – the largest bequest in its almost 84 year history. Per Mr. English’ wish, the money establishes the Richard L. English Fund as a permanent endowment, which will be invested in perpetuity and from which earnings will be distributed as grants annually to the following organizations: New Haven Symphony Orchestra (40% of available annual distribution), the New Haven Museum (40% of available annual distribution), the Neighborhood Music School (10% of available annual distribution) and the Connecticut Yankee Council Boy Scouts of America (10% of available annual distribution).
As one might expect, there were cheers all around.
The Community Foundation:
“This extraordinary gift is a great step forward for community philanthropy in Greater New Haven and a reminder to us all of the powerful role local giving plays in the future of our community,” said Will Ginsberg, President & CEO of The Community Foundation for Greater New Haven. “The magnitude of Mr. English’s generosity will be felt for generations, every time an English Fund beneficiary thrills this local community with a concert, teaches a child to play a musical instrument, inspires an appreciation for New Haven’s rich history, and builds a child’s character through scouting activities,” said Rolan Joni Young, Chair of the Board of Directors of The Community Foundation for Greater New Haven. “The English family has a deep connection to New Haven and long standing ties to The Community Foundation,” said Will Ginsberg, President & CEO of The Community Foundation for Greater New Haven. “Richard’s bequest follows the tradition of his parents, who each established funds through their wills to ensure that their local community would continue to benefit for generations to come.”
The New Haven Symphony:
“For over 300 years, the English family has contributed to New Haven’s history and helped to build our City into Connecticut’s cultural center,” says Elaine Carroll Executive Director of New Haven Symphony Orchestra. “ With this historic gift to the New Haven Symphony Orchestra, Richard English assures that we will be an orchestra for the future. His generosity will allow us to pursue new collaborations and to achieve greater success in meeting the needs of our community. For generations to come, music will be a living, breathing presence in Connecticut thanks to Richard English.”
The New Haven Museum:
“Richard English’s generous bequest is a continuation of many years of support for this institution from the English family. His grandparents and parents were noted for their involvement here, and Richard’s interest and support has always been an encouragement. These funds will enable us to go forward as we seek to ‘collect, preserve and make available’ material documenting the history of this region,” said Jim Campbell, Librarian and Curator of Manuscripts at the New Haven Museum.
The Boy Scouts:
“Richard was very interested in the preservation of open land and birding was very important to him,” says Louis Salute, Council Scout Executive, “but he was also interested in youth development. He wanted to help young people appreciate wildlife and the environment.”
The local newspaper celebrated the story too.
But I had to wonder…
Did this bequest – as managed by The Community Foundation – really make good sense?
Notice, the money goes into the Foundation’s endowment. Its value will rise and fall with the endowment’s value – and how well the Foundation manages its portfolio. Absolute dollars are not promised to any of the intended nonprofit beneficiaries. Only a percentage or what the money earns each year. Thus, if the bequest is managed as described, the entire face amount – $20,024,640 – will reside permanently in the Foundation’s coffers.
Now of course the benefit to the nonprofits identified to benefit from the bequest is that they will get a relatively predictable annual donation of considerable value (as long as the Foundation’s investments do okay).
But they will never have access to their share of the full bequest at any given time. What’s the logic here? For instance, I think it’s fair to ask, on their behalf:
o Couldn’t each of these nonprofits have invested their share of the $20 million with as good a chance of earning ROI as the Foundation?
o And even if their portfolios didn’t do as well as the Foundation’s over time, might they not get much better value by having the ability to tap bigger amounts for specific needs in a given year than the Foundation will dole out to them?
o Why were they not trusted to manage their share of the money themselves in order to meet emergent needs and respond to strategic challenges and opportunities – unconstrained by being limited to an annual pay-out from the Foundation?
Apparently the bequest was negotiated between Mr. English (before he died) and the Foundation. And notice how the Foundation celebrated this bequest as an instance of his family’s history of donating to it, of setting up funds for it to manage. Keeping in mind that the Foundation keeps the full face value of the bequest in perpetuity, is it entirely unfair to wonder about whether the Foundation has a conflict of interest in such an arrangement? In a very real way, though not transparently, the Foundation competed with the identified nonprofits for access to the face value of the bequests. Since the Foundation “won,” one might reasonably ask: what is the added value that the Foundation will provide to the identified nonprofits to justify that this was a good way to manage the bequest? Nothing of what I have seen that the Foundation has said so far provides any answer to this question.
So who benefits most from the way this bequest was structured?
Well, clearly the Foundation did. And of course, the Foundation carries a lot of weight in New Haven, and its donors earn a lot of cachet. But it isn’t so clear that the identified nonprofits will benefit nearly as much as they might have had the bequest gone directly to them.
True enough, their spokespeople joined the chorus celebrating the bequest and its management by the Foundation. But did they have a choice? If, as seems to be the case, they were not at the table when the Foundation and the donor negotiated the terms of the bequest, it would have been most impolitic to look a gift horse in the mouth after the fact. And it hardly makes strategic sense for them to alienate the biggest local funder (the Foundation) by asking the kinds of questions I have posed here.
But all that does is illustrate how nonprofits act and no doubt feel greatly disempowered in their relationships with funders. While understandable, this is a fundamentally unhealthy stance, and leads nonprofits to act weaker than they might be if they adopted a more assertive posture with their funders.
Conversely, funders often lose sight of the fact that, really, they can only claim to be useful to society if the organizations they support have the best possible chance to succeed in their work. There is a kind of “funder-centric” blindness that those who channel resources to nonprofits often exhibit in relationship to their grantees. A blindness that leads them not even to ask the kinds of questions raised here.
These two, highly interrelated aspects of the funder-grantee relationship contribute to the ways in which, as most observers would agree, the nonprofit sector continues to underperform.
David E. K. Hunter
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12.04.11
Posted in Uncategorized at 2:19 pm by Administrator
In my recent post regarding a discussion that took place at a meeting of the Alliance for Effective Social Investing, I described not only what was said (and unsaid) but also attributed roles to people whose institutional affiliation I misidentified. This was brought to my attention quickly, which gave me the opportunity to redact the incorrect information from the original post and further, in an associated comment, to express my regret to the people and organization I had misidentified.
Perhaps I could have left it at that, but I have been thinking hard about this sequence of events because I want very much to be a responsible blogger about funder-grantee relationships and, if possible, to contribute to a growing movement to improve on them. I took on this role determined to say hard things that need to be said but often are not, and when it is pertinent to the matter to go so far as to name names. Why? So as not to deal in innuendo, to be able to cut through some of the very polite but ultimately hidebound communication practices of this sector, and finally so people would know what I am talking about with sufficient specificity so as to provide opportunities for concrete, grounded, and thoughtful exchanges.
But clearly I had not thought through sufficiently what the ethical requirements of doing this well would entail. It is not good enough just to tell the truth as I see it. While that may be sufficient for broad observations and generalizations intended to identify pervasive and problematic issues, I have realized that the more detailed my comments become, the higher must be the requirement that I fact-check. Another way of saying this is that I must consciously adopt high journalistic standards for my writing when I report on specific events and identify specific participants. That sounds obvious as I write it now, and I wish I had stopped to think these principles through before I started to blog. But I hadn’t, and I regret that now.
All I can say is that going forward I will hold myself scrupulously accountable for acting in consonance with these thoughts. At all times I will welcome feedback on how I am doing, and should I fall short will acknowledge this publicly. I hope in this manner to create a blog space in which difficult issues are identified, tackled and discussed, where people find it safe to argue respectfully. In other words, where people can, as the saying goes, disagree without being disagreeable. And that, most assuredly, includes what I expect of my own participation.
David E. K. Hunter
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11.23.11
Posted in Uncategorized at 2:27 pm by Administrator
So…a few weeks ago I attended a meeting of the Alliance for Effective Social Investing in Washington, DC. In the course of a discussion about the grantee-funder relationship, Peter Hero, a member of various philanthropic boards including, I believe, the Skoll and PBS Foundations, said that “foundations cannot be held responsible for the results of their grantees’ [efforts].” I waited for a while to hear what reactions this might stimulate, but not a single participant spoke up.
After several minutes, as the discussion was moving on I said that I wanted to respond to that comment. I called it appalling, and asked what in the world a foundation is responsible for if not its grantees’ results. The original speaker said well of course it is “an ideal to strive for, but is not a realistic expectation,” given all the intervening variables.
I said that I found his clarification as appalling as the original statement. We hold airlines responsible for passenger safety, hospitals responsible for patient wellbeing, and – perhaps more to the point – we hold our investment portfolio managers responsible for the performance of the funds they manage. While in all these cases we fully understand contextual constraints and intervening variables, nevertheless we expect the people who manage these activities to assume responsibility when things go wrong or if they don’t measure up to what was intended or promised. Imagine a stock portfolio manager saying that his or her responsibility for the performance of a stock portfolio is “an ideal to strive for”! How long would that person have a job?
Now I don’t intend to single out Mr. Hero – nor the Skoll or PBS Foundations – as unique in casually shrugging off responsibility for grantee performance. I raise this as an evocative example of what I believe is a pervasive stance among foundations, as evidenced by the lack of response among other participants when the original comment was made. If I am correct in this assessment of the state of the field, several troubling aspects of the funder-grantee relationship emerge. In no particular order other than that in which they occur to me, here are a few (and I do recognize that these are generalizations, and leave it to you to decide to what degree they capture an important set of truths):
o There is no national consensus that foundations, double-tax exempt though they may be since they are supposed to be addressing public needs to qualify for their not-for-profit status, should indeed be held responsible for doing so. Simply put, foundations work in an accountability-free environment.
o But no foundation would ever seek to advertise its lack of responsibility for conducting its grantmaking operations without a commitment to achieving societally worthwhile results. So instead of shouldering responsibility for effective grantmaking, foundations off-load responsibility for getting results onto their grantees…and when things go wrong, often will either hide this fact or blame grantees for failing to deliver what they promised.
o Among other things, this results in grantmaking practices where insufficient thought is put into what would constitute grantmaking efforts that could create realistic frameworks within which, indeed, foundations could be held responsible – for the effects of their grants on grantees and, consequently, on their contribution to (or failure to contribute to) grantees’ results. Typical grantmaking practices that undercut grantees’ ability to achieve results as promised include:
• exorbitant transaction costs,
• narrowly programmatic funding (without acknowledging the foundation’s responsibility to provide sufficient overhead so the grantee will have the organizational depth and capacities to manage service delivery well),
• rather short grant spans that require constant reapplication or even disqualify grantees for further funding after a few years (in the name of not promoting dependency, which perpetuates the eternal grant-seeking way of life that nonprofits endure, and undercuts performance dramatically), etc.
o But foundations generally speaking don’t want to sound like they are irrelevant to the creation of social good, so they induce potential and current grantees to over-promise – and grantees are only too willing to oblige (with a disempowered shrug of victimhood). Just read a few nonprofit organizations’ mission statements and try to imagine whether they could realistically be held to delivering on them in any way that is assessable. But these mission statements are encouraged by their funders! And so now we have a minuet of madness: Funders encouraging nonprofit organizations to overpromise, nonprofit organizations routinely doing so (and, when questioned about this, characteristically acting as if this were simply a fact of life that bears no discussion), and together dancing to a deadly tune that creates the gap between what foundations and grantees promise to society and what they actually deliver – a gap that actually is a crevasse into which those who desperately need nonprofit agencies to help and support them fall.
o What this all adds up to is a sector that is delusionally self-satisfied with its performance, yet in fact underperforms consistently in its work on behalf of those sectors of our society where high functioning nonprofit organizations and their funders must step into the void left by retreating government services and removed corporate interest.
o All of which is not to say that there are no exceptions to these generalizations – both among foundations and their grantees. But such exceptions do not refute what I think most thoughtful observers of the social sector would agree are dominant themes. We should indeed pay attention to these exceptions, and learn from them.
In my next post I’ll talk a bit about social investing and a how to manage the risks inherent in this work – on both sides of the grantee-funder boundary.
David E. K. Hunter
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11.22.11
Posted in Uncategorized at 4:49 pm by Administrator
Hello friends and colleagues – and all parties interested in the American nonprofit sector.
In this blog I will be addressing a rather narrow domain. I will not be talking about the “nonprofit sector” nor about “philanthropy.” Rather, I will be exploring aspects of the funder-grantee relationship that, in my view, undercut the potential for direct service providers to live up to their promise – that is, to improve the lives and prospects of the people who turn to them for help and support.
Among the issues I will be talking about are:
• What is effective social investing?
• What are practices or operations that promote effective social investing?
• What undercuts effective social investing?
• Does it even make sense to talk about accountability in the nonprofit sector? If so, accountability for what? If not, what does this mean for social relevance of the nonprofit sector (a $1 trillion tax-exempted industry)?
I look forward to engaging with many perspectives on these and related questions, and stimulating discussions that, I hope, will be informed by a great sense of urgency to fix what, I believe, may fairly be characterized as a high level of dysfunctionality in funder-grantee relationships – with rather serious consequences devolving to those individuals, families, groups and populations who need a strong social sector to get the kinds of help, supports and opportunities they need to improve their lives and prospects.
David Hunter
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