In the previous post, I explored the difficulty of developing clear goals and being disciplined in sticking with them as one reason why foundations are not more strategic. This post looks at a second topic, “unique positioning.” The CEP report argues that business strategy is different than foundation strategy, in part because the concept of unique positioning is less relevant for philanthropy than for business.
Why did strategy emerge in the historical period that it did? One hypothesis is that the rise of strategy occurred in part because of the proliferation of foundations. The basic idea is that as more and more foundations work on a finite number of issues, the problem of how all their work fits together emerges, and “strategy” is viewed as a partial solution to this.
This implies that when there were fewer foundations, strategy was, in some sense, not as hard. And this fits with what historian Stanley Katz has observed in his essay “What does it mean to say that philanthropy is effective?” – namely that strategic philanthropy isn’t new, it’s been what American foundations have done for over a century.
Could it be that in today’s environment it is much more difficult to be strategic than it was fifty years ago, so foundations must work harder to be strategic than in the past? Put more concretely, foundations today are much more likely to have to account for lots of other funders doing work in their domains as they think about their strategy. The environment is more crowded.
CEP’s case study on the Flinn Foundation illustrates that point. One factor in Flinn becoming more strategic was the formation of new foundations in Arizona with missions that overlapped Flinn’s and that had larger endowments. And today’s foundations need to consider a lot more than newly formed foundations. As Lucy Bernholz has analyzed, philanthropy is increasingly comprised of other institutional vehicles in addition to foundations to get things accomplished. So the idea of unique positioning may be more applicable in today’s environment than it was a decade ago.
All of this points to the need for and value of intermediaries and networks coordinating and fostering more explicit relationships among philanthropic organizations – an under-resourced and challenging undertaking. One effort underway at Duke University, in collaboration with Growth Philanthropy Network, is the Social Impact Exchange, which aims to be a forum for scaling effective social programs and solutions.
These musings have led me to conclude that I may have started with the wrong question. Rather than being disappointed in the apparent lack of progress in foundations becoming more strategic, perhaps a better set of questions revolve around how strategic foundations are, and why? And how this has changed over time, and why? Answering these questions may lead to a better understanding of steps the field can take to make the progress so many are eager to see.
Bob Hughes is an independent consultant on strategy and organizational learning in health and philanthropy.
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Disclaimers and Disclosures: The views expressed in the CEP blog by guest bloggers are entirely their own and do not necessarily reflect the opinions of the Center for Effective Philanthropy.
I think Bob is onto something regarding the influence that changing environments have on how foundations think about themselves, their strategies and their effectiveness. For almost two decades now it has been plainly clear to community foundations that they operate in an extremely competitive environment when it comes to attracting donors.
In response, they’ve sharpened their services and their messages about what distinguishes them from other vendors of donor advised funds, philanthropic advice, and community philanthropy. (Not to say more isn’t needed, but that’s for another blog comment). Generally speaking, community foundations are clearer, more strategic and more effective in delivering on their value proposition vis-a-vis the rest of the marketplace for donors – because they’ve recognized and responded to that competition.*
At the same time, it is increasingly difficult to draw straight lines between input and outcomes on any social endeavor – as the mix of participants is likely to include a wide range of philanthropic partners, social enterprises, nonprofits, commercial entities, individual actors, and public agencies. Causal attribution isn’t the goal – strategic clarity about the contributions of each actor in the network should be.
The point is two fold – greater philanthropic options make it more contingent upon each player to “prove their worth” and also make it harder to do so.
*(I would argue private foundations – indeed all philanthropic actors – are similarly challenged to make their case in the market of donor options. Newer foundations, with living donors and uncommitted endowments may be leading the way here.)
This conversation continues to engage me on a foggy morning in Marin. My work spreads across sectors and it has been interesting to see how the current economic climate has brought to the forefront the importance, admittedly with lack of clarity on definition, of being strategic.
I think of being strategic as a muscle. As with working out,the more you engage in a certain set of activities over time with increased repetition the more likely you are to strengthen a particular muscle. For instance, ones ability to ride a bike 5 miles vs run 5 miles engages different parts of the body and mind.
With more information available than we have ever had before about what works and what doesn’t, shifting interests, changing resources and a more diverse set of stakeholders, perhaps now is the time when foundations can best be strategic.
Jara,
I share your hope that now may be a good time for foundations to become more stratgic, and I agree that the factors you mention – growing access to understanding effective practices, more diverse actors bringing new perspectives – could help. But I think Lucy Bernholz has it just right in her observation that some of these changes also can make it harder. Her example of how community foundations have changed in response to an increasingly competitive environment underscores not only how they have upped their game, but also that it has been tough work and taken 1-2 decades for these dynamics to unfold. So I’m perhaps less sanguine than you are that the field will make significant progress quickly. The systematic pressures on foundations to learn how to become more strategic remain weak compared to organizations in the private sector, and the institutional capacities to adapt appear underdeveloped. To build on your analogy, the organizational muscles of foundations have not been widely used repeatedly to adapt quickly or effectively to new environments. It is a capacity that needs to be learned and practiced, and it will require leadership from within the sector to promote it.
Hi Bob,
I agree that the silver lining may be in a thunder cloud but I remain hopeful. And yes, leadership from within and external to the sector is critical with this change as with all others. I look forward to seeing a more fit and agile sector emerge after a leaner diet ($$) hopefully complimented by more accurate and relevant information (nutrition) and realistic goals.