1. INTERNET, THROUGH BLOGS AND MESSAGE BOARDS, INCREASINGLY USED AS VEHICLE FOR CRITICIZING FOUNDATIONS

There is increasing online attention to foundations and philanthropy, and it's a sign that the public is watching and recognizes its role in the sector's "public trust equation." That's according to philanthropy consultant Lucy Bernholz, writing in a postto her Philanthropy 2173 blog.  The various blogs focused on philanthropy recently tore into the story about the investment practices of the Bill and Melinda Gates Foundation in an unprecedented way, even creating a back–and–forth discussion. The investing story began with a critical, two–part Los Angeles Timesseriesthat ran in January and reported, among other things, that the Gates Foundation mandates that its grantees operate in ways consistent with its stated goals but doesn't require the same of the companies in which it invests. More than half a dozen bloggers were engaged on the subject, delving into the specifics and technicalities of socially responsible investing and whether it amounts to rating companies as good or evil. But the focus was mostly on the general implications of the practice for foundations, and whether it's a "slippery slope" concept of curtailing foundation freedom – or whether it's simply a way for foundations to honor their tax–exempt pledge to use wealth to improve society.  Financial consultant Sean Stannard–Stockton has created a roundup–style post of the discussion in his Tactical Philanthropy Blog. And it's not just blogs. A whole online community of people engaged in the subject of philanthropy has sprouted. As Phil Cubeta of the Gift Hub Blog writes: foundations "will increasingly have to answer to the public" as more people use the Web to air their grievances.

Of course, besides the Internet commentary on foundation investment practices, these investing issues have been discussed in other more traditional forums, including a Feb. 12 symposiumat the Hudson Institute that featured Lucy Bernholz and others.

2. FOUNDATIONS CHALLENGED TO INFLUENCE BUSINESS PRACTICES

Even prior to the recent flare up in attention to foundation investment practices on the Internet and elsewhere, one foundation leader had given a speech calling for more focus on this issue. At a November event celebrating the Foundation Center's 50th Anniversary and focusing on philanthropy's future, Douglas Nelson of the Annie E. Casey Foundation said that philanthropy's big challenge is to help shape the way that businesses conduct themselves. According to the event's transcript, Nelson said that there is significant unrealized potential in using the influence of philanthropic endowments to encourage and reward private–sector decision–making. How foundations deploy what is already a collective half–trillion dollars in assets – and which will soon become many times that – is critical to helping improve society, he said. Such a focus on foundation investments can help the market become "less indifferent, in some cases less hostile, and in some cases a downright ally to bringing about the kind of investments that would make a fairer, safer and maybe more prosperous country."

3. BIGGEST DANGER FACING PHILANTHROPY TODAY IS DEFERENCE TO PUBLIC PRESSURE

Indiana University's Leslie Lenkowsky warns that foundations are in danger of being "smothered" by the public's embrace: they could too easily give in to requests and demands by elected officials to help carry out their priorities. The Winter issue of the Wilson Quarterly features an essayby Lenkowsky focused on an increasingly wealthy philanthropic sector. Whether increased scrutiny will become as fervent as it was thirty years ago, Lenkowsky writes, depends considerably on how the new leaders of philanthropy conduct themselves. To some extent it will require a balancing act. On the one hand, if foundations become overly sensitive to public pressures and work too closely with government agencies, he says their ability to accomplish much at all will be impaired. And yet, if philanthropists don't cooperate with demands for greater involvement in politically–driven initiatives, political recriminations are likely to ensue.

4. PHILANTHROPY LACKS UNIFIED STANDARDS, VALUES OF MANY PROFESSIONAL FIELDS

Philanthropy can reach its full potential only by becoming a field that gives more careful scrutiny to its standards and practices, and  encourages its practitioners to consider their work a career. That's according to a book edited by William Damon of Stanford University and Susan Verducci of San Jose State University. Taking Philanthropy Seriously: Beyond Noble Intentions to Responsible Givingtakes a hard look at today's approaches to see how well they are serving philanthropy's essential mission of promoting the public good. Damon writes in the book's introduction that philanthropy is a field that is unable to gauge its own shortcomings and thereby lead itself toward progressive change.  It's a recipe for ineffectiveness at best, catastrophic failure at worst. Among philanthropy's transgressions are systemic biases: toward goals of social change rather than social preservation; toward judgment of experts rather than practitioners with real experience; and toward trends that have been established by others in the field.

The book grew out of the GoodWork Project, a university–based collaborative research and educational venture that Damon helped start more than a decade ago to examine professional fields such as journalism, higher education, and philanthropy. Professionals employed in philanthropy don't identify with their field in the way that other professionals, such as doctors or journalists, do. There is no unified set of professional values and standards in philanthropy to anchor and guide foundation employees, and foundation staff members don't consider their work a career, and are often oriented to their grantees.  Very rarely do foundation staff members feel an orientation to the field of philanthropy or even to their own organizations. As a result, Damon writes, there's no agreement about what counts as success or failure, opportunity or risk, benefit or harm.

5. CONSIDERING A PHILANTHROPIC 'HIPPOCRATIC OATH': A REVIEW OF CLASSICS OFFERS GUIDANCE ON GIVING TODAY

Those engaged in philanthropy might benefit from a review of classical texts in the same way doctors still look to Hippocrates to help understand the ethics of their profession, according to Georgetown University's James Allen Smith. In a chapter of the book Taking Philanthropy Seriously (see item #4), Smith, who chairs the Advisory Council for the Aspen Institute's Nonprofit Sector and Philanthropy Program, provides a review of "ancient authors" who posed basic questions and offered enduring advice about gift–giving, particularly its capacity to do harm. Among the lessons for modern grantmakers drawn from comments made by ancient philosophers is the overarching importance of adhering to simple civilities, as well as the need to subject giving motives to hard scrutiny. More specifically, Smith says one perennial lesson in grantmaking is the importance of time and timeliness.  It's a topic rarely discussed today, yet foundations' delay in all aspects of their grantmaking is among the most annoying features of modern philanthropy. Undue expectations that come with a gift, or grant, is another perennial issue identified by Smith, something that today can take the form of detailed performance measures, the need to obtain speedy results and prompt project evaluation. Smith says that questions should be asked about what burdens ought to be born by a grantee, and how donors can limit these burdens.

6. TOO MUCH FOCUS ON ACCOUNTABILITY MAY LEAD FOUNDATIONS TOWARD SHORTER–TERM, LESS RISKY ACTIVITIES

An increasing focus on accountability might be making foundations less willing to support activities where impact can't be easily or quickly assessed or where the risk of failure is high. Georgetown University's Steven Heydemann and George Mason University's Stefan Toepler have written the lead chapter in a book about foundation trends in the United States and Europe that draws on papers presented at a conference held in Paris in 2004. In The Legitimacy of Philanthropic Foundations: United States and European Perspectives, Heydemann and Toepler write that foundations are challenged to secure the consent of society and government through two types of legitimacy: procedural legitimacy, or activity conforming to requirements of law, and normative legitimacy, or activity perceived as fair and just. But accountability as a major concern is changing foundation governance and reshaping patterns of grantmaking. As a result, the authors see potentially significant implications for who will receive foundation grants and what kind of activities are most likely to secure support, with quantifiable, shorter–term, and less risky activities potentially taking precedence.

In another chapter of the book, the University of Texas at Austin's Peter Frumkin writes that the substantial increase in the transparency of foundations has been a one–way street of information. There are strikingly few meaningful feedback loops bringing information from grantees or the public back to foundations.

7. FOUNDATIONS' INCREASED FOCUS ON PERFORMANCE SAID TO RESULT IN PART FROM VENTURE PHILANTHROPY; HISTORIAN RAISES CONCERN

Venture philanthropy has sent ripples through the foundation world, influencing the practices of other grantmakers even if these other foundations avoid the term itself. That's according to an article by Nick Standlea of Claremont Graduate University in Taking Philanthropy Seriously (see item #4). In the past decade, foundations have become more focused on performance measures, more engaged with their grantees, and more strategic.  And this shift has been at least in part fueled by the venture philanthropy approach. The article bases its findings on case studies of six foundations. By 2002, all the foundations studied – except one – had articulated ideas and practices associated with venture philanthropy. The Rockefeller Foundation would hold out for another five years.

But last year, the Rockefeller Foundation began making changes to bring it more in line with venture philanthropy – a development that concerns at least one leading historian. In a wide–ranging essay(subscription required) in the Feb. 2 Chronicle of Higher Education, Princeton University's Stanley Katz says John D. Rockefeller and other foundation forebears would be "appalled" at their namesake foundations' efforts to reduce the number and size of programs, as well as by what Katz describes as efforts to measure impact in terms of months rather than years. These efforts reflect a "sense of desperation and a need for self–justification" at established foundations, according to Katz.

Meanwhile, the Rockefeller Foundation's Nadya Shmavonian attributes the changes at her foundation in part to the foundation finally coming to terms with the fact it is no longer the largest foundation in the country. Shmavonian was one of several speakers at the Center for Effective Philanthropy's Five–Year Anniversary Event held in September, and excerpts of her comments have just been made publicly available, through the Center's publication CEP at 5. Shmavonian didn't go into specifics about changes at the foundation, discussing instead the process behind the changes. She cited four key "ah–ha" moments at the foundation, which resulted from the Center's data, including results from surveys of foundation grantees indicating that the foundation has less impact than its peers and places a greater administrative burden on its grantees.

8. FOUNDATIONS ARE NOT FULFILLING PROMISES TO HELP REBUILD NEW ORLEANS; STORIES OF 'DIVERTED FUNDING AND UNMET NEEDS'

Foundations are not fulfilling their promise to help rebuild New Orleans post–Katrina, and the help they have offered often isn't focused on actual needs or granted to local organizations, according to an impassioned article posted to the Alternet Website. Jordan Flaherty, a union organizer and editor of Left Turn Magazine, quoted nonprofit leaders and residents in New Orleans in this Jan. 18 articlereporting on "countless stories of diverted funding and unmet needs." The article quoted several activists who have written an essay for an upcoming anthology about post–Katrina New Orleans which argues that foundations have focused on quick, quantifiable efforts, and not on other activities, such as community organizing, which require long–term commitments. Further, foundations have supported too many people and organizations from outside New Orleans and others who set up shop in the city after Katrina. Another leader shared what Flaherty says is a common sentiment: "It's not just that you have to jump when [foundations] tell you to jump, you also have to act like you wanted to jump anyway." The article concludes with recommendations for foundations, from better coordinating their efforts to offering support specifically for seed money, technical training, and leadership development.

9. PHILANTHROPY SHOULD ADDRESS SOUTH'S 'STUBBORN SOCIAL PROBLEMS' IN THE AREAS OF EDUCATION, POVERTY, HEALTH

Philanthropy should address the issues exposed in New Orleans after Hurricane Katrina – of poverty, class and race divisions, environmental degradation, and governmental detachment from everyday citizens – but do so across the entire South. And the South, in turn, needs to produce more of its own philanthropic assets to help push the region to solve its "stubborn social problems." Both recommendations are part of a report examining how demographic, economic, education, and health trends bear on philanthropy in the South. The sixth in a series – but the first to focus on philanthropy – The State of the South 2007: Philanthropy as the South's Passing Gearwas produced by the nonprofit MDC Inc. The report offers four priority areas Southern philanthropy should focus on, including youth education, economic and labor development, poverty reduction, and public health. The report says much of Southern philanthropy already flows to institutions that could play a stronger role in building knowledge and mobilizing action, from universities to medical centers to social service organizations.

10. FUNDERS SHOULD ENLIST GRANTEES IN WORKING FOR SOCIAL CHANGE; HEED THEIR ADVICE ON IMPROVING PRACTICE

One mantra should guide foundations seeking to work for social change: "Don't do anything about me, without me," meaning that grantees should be enlisted to co–create foundation initiatives. The need for grantmakers and grantees to work together is a key finding from a project of Grantmakers for Effective Organizations. Listen, Learn, Lead: Grantmaker Practices that Support Nonprofit Resultsdocuments lessons learned from the first phase of GEO's Change Agent Project, which seeks to identify the most promising ways grantmakers can contribute to nonprofit results. The report's title distills the key lessons: Grantmakers should listen to grantees and apply what they learn to improve their practices, and then – and only then – lead the charge for social change. What grantmakers are likely to hear from grantees, according to focus groups of nonprofit leaders conducted by GEO, is frustration with many funders' ever–shifting priorities, their aversion to multi–year grants and operating support, and their lack of transparency and accountability. The second–half of the short report provides specific profiles of those GEO has identified as philanthropy's "change agents." But what it has found in many of these grantmakers is a commitment to greater inclusiveness in all aspects of their grantmaking. They make a real commitment to diversifying their staffs and boards, and they make the "community voice" an important influence on their work

11. FOUNDATION GROUP'S LISTSERV HEATS UP WITH UNPLANNED DEBATE ON OPERATING SUPPORT; MOST PARTICIPANTS FAVOR PRACTICE

"I continue to be struck by how the one thing most grantees say they need, which is operating support, is the one thing most foundations won't give them." So commented one grantmaker in a post to the members–only listserv of Grantmakers for Effective Organizations. The post came as part of a members' debate on the merits of providing general operating support vs. program support. GEO plans to post online soon a summary of the discussion, and is also undertaking other projects on the subject, including releasing later in the year an "Action Guide" that synthesizes information and arguments for funding operating support. But the debate itself wasn't planned. A GEO member's query on the listserv about what expenses should count as a grantee's indirect costs associated with a specific project provided the debate's impetus. In response came a post arguing in favor of foundations providing operating support, since such support, according to this poster, sidesteps the question and frees nonprofits from the "somewhat arbitrary exercise" – not to mention time–consuming job – of identifying indirect vs. direct expenses. While other foundation officials shared their policies on indirect costs and continued to weigh in on that kick–off thread, the discussion quickly heated up and became what participants called a "fire pit," with posts arguing that providing "unrestricted" operating support is critical to achieving organizational effectiveness.

One listserv participant suggested the debate is regional, with West Coast foundations more open to providing operating support than those in the "old–line East Coast tradition." The same poster offered a middle ground (call it Midwestern) approach: foundations should take advantage of their unique position of being able to offer whatever grantees, within legal limits, need to achieve their missions. As a later post described it, foundations could be flexible and offer a mix of types of grants, from short–term to multi–year as well as general operating support, based on their history with the grantee and how well and how much of its work fits with the foundation's mission.

12. MAJORITY OF CALIFORNIA FOUNDATIONS PROVIDE OPERATING SUPPORT GRANTS; PRACTICE IMPROVES TRUST BETWEEN FUNDERS AND GRANTEES

At least one survey has found that foundations are more engaged in providing general operating support grants than many may believe – and that the practice changes the practice of grantmaking in subtle ways, making it more of a partnership. The University of San Francisco released a reportin December based on a survey of California grantmakers as well as follow–up with focus groups and individual interviews. Over three quarters of foundations in the survey made general operating support grants, although the majority of respondents provide operating support grants that total less than 25 percent of their overall grantmaking. The study also found that opinions about the practice differ between foundation staff and trustees, with staff overwhelmingly favoring the concept but boards less supportive.

Meanwhile, the study said that such support changes the nature of grantmaking in subtle ways, including improving trust and making the entire process of grantseeking more "honest," and also more of a partnership. This is so because it forces foundations to trust that grantees will use the funds in mission–appropriate ways, and because nonprofits seeking funding do not have to hide their need for basic operational support in their project specific budgets.

13. CONCERNS RAISED ABOUT DONORS' FOCUS ON FIGHTING SPECIFIC DISEASES INSTEAD OF BASIC HEALTH NEEDS IN POOR COUNTRIES; 'FOREIGN MEDDLING GONE AWRY'

Advocacy, the whims of foundations, and the particular concerns of wealthy individuals and governments drive practically the entire global public health effort, with the result that the developing world risks falling further behind. It's "yet another tale of well–intended foreign meddling gone awry," according to Laurie Garrett of the Council on Foreign Relations, writing in the January/February issue of Foreign Affairs. In "The Challenge of Global Health,"Garrett suggests many ways foreign donors and others can improve the situation, from working to expand the developing world's local talent pool of health workers, to restoring and improving crumbling national and global health infrastructures, to devising effective local and international systems for disease prevention and treatment. But her central point is that instead of focusing on fighting single diseases, the world health community should focus on achieving two basic goals: increased maternal survival and increased overall life expectancy. Those are the two best indicators of a society's overall health and well–being, according to Garrett, and vanquishing HIV/AIDS, tuberculosis, and malaria should not be tasks in themselves but essential components of these two larger goals. A focus on fighting specific diseases reflects the interests of donors more than recipients, with diseases and health conditions that are in the spotlight in rich countries garnering the most attention and money.

In late January, the Council on Foreign Relations hosted a "special Web" roundtable discussionabout Garrett's article, featuring posts from several experts in two rounds of comments, followed by a concluding response from Garrett.

14. FOUNDATIONS HAD 'TERRIBLE IMPACT' ON RUSSIAN EDUCATION REFORM,

A shift in foundation priorities from supporting individuals toward supporting institutions had a "terrible impact" on efforts to reform higher education in Russia, according to the Jan. 31 Inside Higher Ed. Theonline news site reported in an articleabout a "semi–secret report" from Princeton University's Stephen Kotkin about foundation efforts in Russia. The John D. and Catherine T. MacArthur Foundation's John Slocum was quoted in the article worrying that a "trend toward gigantism" in the foundation world might lead to more situations like the one in Russia. There, according to Kotkin, funders made some progress reforming Russian universities by providing grants to individuals for research and educational projects. These foundation efforts failed, however, once they changed course and began looking for "mega–projects" intended to create institutional or departmental shifts. This change in foundation priorities toward institutional support came even as Russians and Russian experts "on the ground" advised against it. According toInside Higher Ed,Kotkin advises foundations in Russia to abandon big reform efforts to focus on merit grants to individuals; helping scholars form Internet networks and create journals; and building a local peer–review system.  According to Inside Higher Ed, this is the fourth such book–length study Princeton's Kotkin has conducted on the impact of foundations on higher education in the post–Soviet Union, but the first time he has ever publicly discussed any of the studies.

15. INITIALLY UNSUPPORTIVE, FOUNDATIONS EVENTUALLY GAVE AIDS GREATER VISIBILITY, LEGITIMACY; HELPED PROFESSIONALIZE FIELD

Their response was delayed, but foundations gave AIDS greater visibility and legitimacy, according to a new book which also mentions that foundations have moved on to support other policy issues now as the disease closes out a third decade. Written by Susan Chambre of the City University of New York and published by Rutgers University Press, Fighting For Our Lives: New York's AIDS Community and the Politics of Diseaseoffers a social history of the AIDS community as well as what it calls a window into understanding the politics of health policymaking. The book only touches on foundation support of the disease. Chambre writes that AIDS was initially of little interest to foundations, given early stigma of the disease and the fact that many foundations didn't support "single disease" organizations. According to the book, it took, in part, a heavyweight, the Robert Wood Johnson Foundation, to focus on the disease before other foundations, local and national, made AIDS a funding priority. Foundation support helped fledgling AIDS organizations hire their first employees, obtain their first government grants, and carry out controversial prevention work that the government was unwilling to fund. In the process, these organizations lost their informal, ad hoc nature and became more professional and bureaucratic.

Of Related Interest

Book Stresses Power of Spotting Ideas, Offers Guidance in Making Ideas Memorable
Grantmakers for Effective Organizations (see item #10) advises that instead of launching initiatives based on new ideas from outsiders, foundations should search for and invest in the most effective organizations already working in a particular field. A new book for a general audience about memorable ideas offers similar advice. "The world will always produce more great ideas than any one individual" – or foundation –  "even the most creative one," according to brothers Chip and Dan Heath, a Stanford University professor and a business consultant, respectively. In Made to Stick: Why Some Ideas Survive and Some Die, the Heaths detail what they mean by "sticky ideas," or those easily understood and remembered and that change thought or behavior. They talk about the art and power of "spotting" sticky ideas, rather than trying to create them out of whole cloth, and they stress the importance of asking repeatedly "why." Doing so helps get to the core values and principles that underlie ideas: Why is what you do special? Why does it matter? Why should people care?

Related Reading

Publication Details Foundation's Experience in Providing Operating Support to Grantees
Philanthropy's primary funding strategy – restricted grants – too often hamstrings grantees' ability to plan, invest, and respond to changes with vision, flexibility, and innovation, according to a new publication from the F. B. Heron Foundation. The foundation has offered grants for operations, or for "core support," for more than a decade, and three out of four grant dollars from the foundation go towards core support. To help make the case for other funders to follow suit, the F.B. Heron Foundation decided to share its experience with the practice and to offer key arguments. Additionally, the publication provides responses, based on Heron's experiences, to many concerns foundations have about core support, including that it is difficult to evaluate and that it works against focus in grantmaking (also see items #11 and #12).