The use of logic models and theories of change has been much discussed and debated in the field of philanthropy.

Some advocates for their use suggest that foundation staff members need to articulate the logic of how the foundation’s work will lead to the achievement of its goals if they are to have a chance of achieving them – and if they are ever to understand the impact of their efforts. One sector leader who holds this position is Paul Brest, president of the William and Flora Hewlett Foundation. As Brest and Hal Harvey, a former Environment Program director at Hewlett, wrote in Money Well Spent, “An intuitively plausible theory of change is better than none at all. [But] the more tested the theory of change, the sounder its use as the basis for a strategy.”

Others argue that the complexity of social problems, and the likely result of getting a logic model or theory of change wrong, means funders should not attempt to lay out the path to their desired goals. Bill Schambra of the Hudson Institute’s Bradley Center for Philanthropy and Civic Renewal Director, argues funders should not “worry about solving a problem in the abstract [or] thinking it through in advance with a bunch of flow charts and variables [because] it isn’t going to turn out the way you thought it was going to.”

So what is the state of practice among large foundations? Last year, CEP collected data on this issue through surveys of CEOs of foundations with $5 million or more in annual grantmaking and published a report that highlights trends in the field regarding the assessment of foundation performance.

The data show that:

• 29 percent of CEOs report using a logic model or theory of change to guide all of their work.
• 40 percent of CEOs report using a logic model or theory of change to guide some of their work.
• 31 percent of CEOs report not using logic models or theories of change in any of their work.

CEOs who use these tools generally place assessing their foundation’s effectiveness as a higher priority than CEOs who do not. Specifically, 80 percent of CEOs who use logic models or theories of change rated the priority of assessing the foundation’s effectiveness a 6 or 7 (on a scale of 1 to 7, with 7 representing the highest priority). About 60 percent of the CEOs who do not use logic models or theories of change gave that high of a rating to this priority.

CEOs who report using logic models or theories of change also use different types of data when assessing their foundation’s programmatic work than those CEOs who do not. CEOs who use these tools are more likely to use surveys of the foundation’s grantees, conduct focus groups and convenings of their grantees, or carry out evaluations of the foundation’s program or issue areas to understand the effectiveness of their programmatic work.

To see an example of how Wilburforce Foundation has used a logic model to drive their strategic thinking, check out this recent guest post from Paul Beaudet.

What is your take on funders’ use of logic models?

Andrea Brock is Research Manager at CEP.

This is the third in a series of posts written by Paul Beaudet of Wilburforce Foundation on the complex relationship between funders and grantees. In Doing Less with Less, he raised the issue of the unrealistic expectations some funders placed on nonprofit organizations in the face of the economic downturn and the subsequent recession, advocating for what he calls a shift from transaction-based grantmaking to interaction-based grantmaking. Last week, in Putting Grantees In the Center of Your Map, Paul expanded on that proactive approach for funders, focusing on the effect of using strategy to increase the effectiveness of funders’ work with grantees and progress toward achieving mission-driven goals. Here, he calls on the philanthropic sector to take a critical look at collective bad habits, offering advice on how to maximize the potential of the partnerships all funders forge with their grantees. 

Grantmakers for Effective Organizations (GEO), one of the sector’s largest coalitions of grantmakers, is organized around a fundamental truth: “grantmakers are successful only to the extent that their grantees achieve meaningful results.”

In my last post, I described how Wilburforce Foundation developed an outcome map that placed emphasis on grantee relationships, grantee capacity, and grantee results. These elements are at the heart of our strategy.

Many of us in the sector refer to our grantees as partners. In some cases, funders and grantees do in fact forge strong working relationships that are truly collaborative. But not always. Sometimes these “partnerships” are more fantasy than fact. Perhaps my perspective is biased by the years I worked as a grantseeker, but I would argue that grantees sometimes see themselves less as partners and more as shoddily treated temporary contract employees.

What are the elements of an effective partnership? My list would include the following:

1. Focus on shared goals;
2. Open communication that embraces the perspectives of all partners;
3. Sense of shared responsibility and interdependence that lasts until the work is done.

As a sector, I believe we generally fail to maximize our potential to create true partnerships. Some aspects of our funding processes, internal grantmaking guidelines, and — most importantly — interpersonal behaviors may make us a bad partner. Acting out the worst aspects of the grantmaker-grantseeker power imbalance can be an impediment to impact.

Over the years, I’ve heard reports of foundation practices that are inexplicable, disappointing, or shocking. One grantee wryly dubbed these bad practices as “stupid funder tricks.” Here are a few examples that I believe undermine our sector’s potential for success, shared by grantees and culled from my own personal observations:

• Marching to your own Bette: One of my favorite movie quotes was uttered by Bette Midler in Beaches: “But enough about me, let’s talk about you… what do YOU think of me?” Funders sometimes seem to forget that we are one of many players, and that the work is not exclusively about us. One grantee reported having to rewrite a proposal and revise a board-approved strategic plan to more explicitly align his organization’s goals, outcomes and objectives to the funder’s. Another complained that foundations sometimes seem to create initiatives that presume the participation of others without actually engaging potential partners before a new strategy is announced.
• The view up here: I have sat through some wince-inducing meetings between funders and their “partners.” I have seen my foundation colleagues dominate the conversation, make demands, and tell a grantee that their strategy was — direct quote — “bad.” The kindest possible frame for this: funders have a uniquely broad perspective, we have seen what works and doesn’t work in other parts of our grantmaking portfolio, and we need to assure that our grantees are using resources as wisely as possible. That is certainly sometimes true. But we have to allow for the possibility that we may be wrong. Our grantees are likely to have a much deeper understanding of the social, political and economic context in which they are working than we do. Strategies or tactics that succeeded elsewhere may be ineffective applied in a new context. In short, we have something to learn from our partners, if we let them speak, and we approach with questions and not prescribed solutions.
• ADDled Funders: Another grantee described the devastating loss of a $250,000 grant when a foundation suddenly decided that his campaign was no longer a priority. This group was forced to lay off the staff they had hired with the implied promise of ongoing foundation support, and this significantly harmed the organization and its ability to advance its goals. Other grantees have expressed dismay at the life expectancy of a typical foundation strategy, which rarely seems to last for more than two or three years. I can certainly point to funding colleagues who seem to display a bit of institutional Attention Deficit Disorder (ADD): trouble staying focused, extreme distractibility, and difficulty completing tasks.
• I need air: Some foundations set arbitrary caps on the maximum number of years a grantee can receive funds. Despite affirmations that a grantee’s work is critically important, I have heard some funders worry aloud that groups will become “dependent” on their grants. Instead of sustaining work over the lifetime of a project, some funders retreat, forcing the group to seek new revenue sources. Funders not only hurt their grantees, they hurt themselves by sabotaging any progress they and their former partners may have made.
• Getting to “No” you: Some foundations seem perfectly happy to reject potential partners merely on procedural grounds. Applicants who submit well-polished prose and neatly organized attachments are rewarded. Those who stumble during the process may be dinged. One funder once boasted to me that he generally declined proposals that arrived by overnight post, suggesting that if a group was too disorganized to get a proposal in early and had money to waste on delivery charges, it didn’t deserve foundation support. He had never worked for a nonprofit organization, and didn’t understand that fundraisers are struggling to meet the demands and deadlines imposed by multiple funding sources. Process-based decision-making may favor organizations with savvy grantwriters, but these may not necessarily be the groups whose programs are most effective. Instead, we should be exploring the quality of ideas or the potential for a group to advance shared goals.
• Drowning in Paperwork: Process overload often doesn’t end when an application is submitted. Each funder imposes its own set of requirements on grant recipients. Written and financial reports are the norm. Multiplied across multiple funders, the process burden grows. Sadly, even if these reports are read—and too often they are not—they may not be useful. Project Streamline describes the problem well:

“the current system of application and reporting has grantseekers and grantmakers alike drowning in paperwork and distracted from purpose. Such practices may be only a small part of the bigger picture of grantmaking effectiveness, but they threaten to undermine other grantmaking effectiveness efforts by creating barriers to nonprofit success.”

If funders want to advance a strategy, they need to invest more time in developing relationships with potential partners. The due diligence process can be stronger with less transaction and more interaction.

I could go on.

I am not trying to give the impression that my colleagues and I at Wilburforce Foundation have an unblemished history of perfect behavior. Nor do I want to suggest that the shortcomings in grantee-funder partnerships are always the fault of the grantmaker. But generally speaking, we funders can and should be more sensitive and responsible in wielding the power we accrue as the check-writer in the relationship.

I’ve described some of the symptoms of bad partner behavior. Now I’d like to propose some simple remedies:

• Identify shared goals: We have the power to impose our strategic vision on others, and will almost certainly find grantees to happily use our funding to advance our ideas. But I would argue that our strategies will be stronger if we work with — and are influenced by — our partners. If we ask questions and invite feedback from grantees, welcoming their knowledge and perspectives, we can strengthen our strategies.
• Be patient: Achieving real impact takes time. If we want to forge effective partnerships, we should commit until we have succeeded…or until the evidence suggests that we cannot succeed and a new strategy is needed. Shiny new projects may seem irresistibly alluring, but pursuing new initiatives make it less likely that your previously funded work has time and resources to yield results.
• Build better relationships: We must communicate clearly, consistently, openly and frequently to better understand each other’s goals and strategies. All partners need timely information about new developments, opportunities, and threats that emerge. A partnership cannot simply rely on the process-oriented elements of our work: applications and reports. We need to shift from transaction-based grantmaking to interaction-based partnerships.
• Invest in our partners: Rather that worry about dependence, we should instead recognize our interdependence. To the extent possible, we should be making long-term investments in the capacity of our partners. We should be making explicit multiple-year commitments. We should be helping groups with leadership coaching, fundraising, financial management, evaluation, technology, communications, and other investments that build effective and efficient organizations. We can only succeed if our partners succeed.
• Invest in ourselves: Many of us focus on foundation overhead, striving to keep that number within some benchmark percentage. Instead, we should align foundation operations and programs to assure that we have sufficient human and financial resources devoted to successfully advancing core strategies. We may need to make investments in our own capacity to be effective partners: hiring or reassigning staff, changing grantmaking processes, or shifting to fewer strategies that we can implement more thoughtfully.

It is hard work to be an effective partner. I have learned from experience, though, that healthy partnerships are at the heart of our biggest successes.

Paul Beaudet is Associate Director of Wilburforce Foundation and a member of CEP’s Advisory Board.

This is the second post written by Paul Beaudet of Wilburforce Foundation on the complex relationship between funders and grantees. Last week in Doing Less with Less, he raised the issue of unrealistic expectations by some funders that nonprofit organizations would maintain their prior level of activity despite the impact of the economic downturn and the subsequent recession. He discussed alternatives to this practice and what he calls a shift from transaction-based grantmaking to interaction-based grantmaking. This week, Paul expands on that proactive approach for funders, focusing on the effect of using strategy to shape funders’ work with grantees. That requires a greater investment of time and attention on the part of funders, but in the example of Wilburforce, suggests greater effectiveness and progress toward achieving mission-driven goals.

The Center for Effective Philanthropy (CEP) defines foundation strategy as “a framework for decision-making that is 1) focused on the external context in which the foundation works, and 2) includes a hypothesized causal connection between use of foundation resources and goal achievement.”

Loosely restated, this says 1) foundation strategy should focus on the change that you are trying to make in the world, and 2) any logical person should be able to see the connection between how you spend your time and money and that change.

Most foundations are able to articulate one or more goals– ending homelessness, building a more just and sustainable world, eradicating disease – to name a few examples. Many also acknowledge that these goals are ultimately achieved individually and/or collectively by the grantees in which we invest. But very few foundations explicitly include grantee-specific outcomes in strategic plans, outcome maps, logic models and theories of change.

In our early years, Wilburforce didn’t do that either. We do now, and it has transformed that way we approach our grantmaking.

Wilburforce Foundation was founded in 1991, addressing a variety of environmental causes. In 1998, we created a strategic framework to prioritize the protection of specific, critical habitats in Western North America. Our plan focused on audacious long-term goals, such as protecting the last remaining pristine places, and assuring strong and lasting public support for wilderness preservation. We assumed that if we picked the right grantees and they reported the right types of short-term successes, we could make a leap of faith and assume we were having a longer-term impact. This approach was dissatisfying to our staff and board. We knew we could do better.

So, in 2004, we decided to refresh our strategy and develop deeper understandings of the ecological, social and political contexts of the places we were striving to protect. We realized that the vast majority of our grantees were receiving consistent annual support from us. We were increasingly relying on these grantees to provide on-the-ground wisdom that informed our work. And we were stepping up our investments in capacity building to improve the efficiency and effectiveness of these partners.

We began scanning for the latest thinking on foundation effectiveness, and encountered a monograph that led to a “Eureka!” moment. The Dorothy A. Johnson Center for Philanthropy and Nonprofit Leadership’s report Agile Philanthropy: Understanding Foundation Effectiveness, included a logic model that showed a causal relationship between a foundation’s investments and its desired social change linked to grantee relations, grantee capacity and grantee outcomes:

The Wilburforce outcome map and logic model was built on this framework, and describes the causal links in our strategic plan by more clearly highlighting the importance of grantees in achieving our goals:

By organizing our work in this way, we are better able to describe the logic of our approach to long-term social change:

• Grantee relations: Since grantees are partners, we must communicate clearly, consistently and frequently to better understand each other’s goals and strategies, develop trust, and address opportunities and/or threats that inevitably arise. We often learn more about issues, strategies and tactics from our grantees than they do from us. We hired additional staff to ensure that our foundation had sufficient capacity to nurture grantee relationships, and we developed processes to shift from transaction-based to interaction-based grantmaking. We also consistently use CEP’s Grantee Perception Reports to provide feedback about how well we’re doing.
• Grantee Capacity: Using what we learn from our grantees, we feel better equipped to make smart investments in their programmatic and operational capacity. We invest heavily in capacity building service providers that offer customized consulting, coaching and training in leadership development, fundraising, financial management, human resource management, strategic planning, and engagement technology. We also underwrite and share conservation and social science.
• Grantee Results & Sustained Social Change: If grantees are receiving the support they need to sustain their operations and programs, these organizations will likely be better able to engage in effective work that creates change. Wilburforce also has a better sense of the return on our investments since we can make a logical connection between what we do and what our grantees achieve.

In practice, Wilburforce starts with the change that we desire, which, stated simply, is to create a network of protected habitats that sustains wildlife populations. We select priority regions based on conservation science, and work to identify the local advocates who have, or can develop, the capacity to respond to opportunities and threats to these ecoregions.

One of the earliest places that we fully embraced the Agile Philanthropy model was in the Great Basin. Nevada and Oregon sit at the heart of this remarkable landscape, which contains some of the wildest, most remote lands in the continental U.S.

When we began funding in the Great Basin, there were a few underfunded organizations with passionate leaders working in a region with enormous opportunities and not much history of public lands conservation. As we refined our strategy and shifted to more “interactional” (and less transactional) grantmaking, foundation staff attended science and strategy meetings, grantee events, and field trips to increase our knowledge of our grantees, their work, and the landscapes they are protecting.

As we forged stronger working relationships with our grantees, we learned about their need for:

• Greater inter-organizational collaboration;
• Scientific identification of on-the-ground priorities;
• Leadership development;
• General support funds;
• Membership development and fundraising skills;
• Board capacity;
• Technological capacity.

We brought in a team of talented capacity builders at Training Resources for the Environmental Community (TREC), whose associates have deep experience in conservation advocacy and are trusted by our grantees. TREC developed a Regional Conservation Initiative of coaching and training opportunities that targeted services to four organizations with tremendous potential to advance a conservation agenda.

We also brought together a blue-ribbon panel of science experts from academia, federal agencies, and grantee organizations to develop a useful tool for our grantees to prioritize landscapes. And we provided significant, multi-year general support funding, affording the organizations greater stability and staff retention, and the ability to sustain long-term relationships with important constituencies and decision-makers.

Since Wilburforce began funding in the Great Basin, our grantees have helped protect millions of acres of federally designated wilderness. Wildlife refuges have been expanded, new National Conservation Areas have been established, and hundreds of millions of dollars have been allocated for private lands acquisition and habitat improvements on our public lands. And they’re not done yet. Our grantees are ready to use the relationships they’ve built to ensure that renewable energy development on public lands protects wildlife habitat while decreasing our dependence on fossil fuels.

Wilburforce can only succeed if our grantees succeed. And our grantees can succeed only if they are given the funding, tools and resources they need to do their work. By placing grantees at the heart of our outcome maps, we can focus on strengthening relationships and building capacity to empower grantees to achieve the outcomes that ultimately contribute to our shared goals.

Paul Beaudet is Associate Director of Wilburforce Foundation and a member of CEP’s Advisory Board.

For our recent State of Foundation Performance Assessment report, we gathered data from 173 CEOs of U.S. foundations with annual grantmaking of at least $5 million on the extent to which they conduct formal evaluations of their programmatic work. The data indicate that evaluation remains an essential component of how foundations approach assessment. More than 90 percent of CEOs report that their foundations conduct formal evaluations of their work, and a majority turns to third parties to conduct that work.

A large majority of CEOs report that formal evaluations have helped their foundations understand the effects of their programmatic work. Yet using evaluation well is not easy: fully 65 percent report that having evaluations result in meaningful insights for the foundation is a challenge.

In terms of resources, how much are foundations putting into evaluation? Most are conducting formal evaluations for half or fewer of their grants. The median spending on formal evaluation is two percent of a grantmaking budget.

* * * * * * * *

To read about current foundation CEOs’ attitudes toward assessment and what foundations are doing to understand their performance, see the report, The State of Foundation Performance Assessment: A Survey of Foundation CEOs written by Ellie Buteau, Ph.D. and Phil Buchanan and published by the Center for Effective Philanthropy.

Ellie Buteau is Vice President – Research at the Center for Effective Philanthropy.

Those of us who work for foundations want our grantees to invest in core activities that more efficiently and effectively contribute to desired outcomes. Yet funders may make it harder for grantees to do so, often by focusing exclusively on specific grant-funded activities — as opposed to outcomes — and by underinvesting in core organizational needs.

The National Bureau of Economic Research pegged the official end of the 2008/2009 recession in June of 2009. That may be true, but many foundation leaders recognized then that battered stock market valuations were only the start of what would likely be a multi-year drop in grant making, since payouts were tied to a rolling average of diminished investment portfolios.

That year, I heard far too many colleagues casually suggest that we needed to help our grantees “do more with less.” That remark has been echoed at conferences and convenings ever since. At a foundation event this fall, I challenged a colleague who expressed surprise that grantees still seemed to be doing too little to embrace the fundamental wisdom captured by this phrase. I think I understood the intent behind his lament. But the message he and others may be unintentionally conveying to grantees is unfortunate: that we believe that nonprofits have substantial resources that are being inefficiently deployed, and those of us who work for foundations would do a better job of managing the stress of decreasing revenues and increasing demand for services.

At Wilburforce Foundation, we work with grantees over the long term to protect wildlife habitats in Western North America. Investing in and disseminating science, working with local communities to build support, and convincing policymakers to endorse durable conservation solutions takes time, often years.

Many of our grantees are highly dependent on foundation grants, and we have seen firsthand the consequences of their attempts to do more with less. We’ve been tracking financial data for all of our grantees, including annual revenue and expenses, cash holdings, and net assets. Since the recession began in 2008, more than one third of the groups we support have experienced decreases in net assets of 10 percent or more, and many more have cash-flow cushions that can be measured in weeks, not months.

One of our grantees nearly collapsed in the aftermath of the recession. Many of its programs were funded by restricted grants, and foundations invariably wanted their grant-funded activities to be part of the “more” this group should sustain with “less.” This grantee was shoveling increasingly scarce general support dollars to these programs. The organization only recovered after it jettisoned underfunded projects and sacrificed the foundation grants that had ultimately harmed the organization.

Another grantee relied heavily on one foundation for significant support of its largest program, subject to an arbitrary cap of 15 percent of overhead expenses. The true cost of its organization overhead was closer to 25 percent, and its net assets plunged as the group tapped unrestricted funds to pay for its core needs.

In fact, I see far too many organizations trying to do “more” by sacrificing living wages for its staff, shifting the cost of benefits to employees, cutting professional development budgets, and working with obsolete technology.

An article in the Stanford Social Innovation Review in 2009 described what they called the nonprofit starvation cycle, and attributed much of that problem to funders:

“The first step in the cycle is funders’ unrealistic expectations about how much it costs to run a nonprofit. At the second step, nonprofits feel pressure to conform to funders’ unrealistic expectations. At the third step, nonprofits respond to this pressure in two ways: they spend too little on overhead, and they underreport their expenditures on tax forms and in fundraising materials. This underspending and underreporting in turn perpetuates funders’ unrealistic expectations. Over time, funders expect grantees to do more and more with less and less—a cycle that slowly starves nonprofits.”

So, let’s dispense with tired clichés. Jan Masaoka, director and editor-in-chief of Blue Avocado and former executive director of CompassPoint Nonprofit Services, has better advice for nonprofit leaders: do less with less.

“Of course there is more need, more demand, and we probably have less money. And we love the gritty heartfelt nature of the cry, “We need to do more with less!” Pause. But it’s not only unsustainable, it probably means you will be able to do even less in the future. If a program’s funding has been cut by 30%, you may need to do 30% less.”

The trick, of course, is figuring out which programs are most effective, and make those as sustainable as possible. As funders, we can help our grantees do this in several ways by:

1. More clearly communicating with grantees about our own strategies as funders, and the outcomes we hope to achieve. These conversations have the potential to surface more creative, efficient and effective alternatives to the projects or activities that we may have historically funded.
2. Forging stronger relationships with grantees, so that they feel comfortable approaching us when trouble arises and before the organization’s financial situation becomes dire.
3. Understanding and supporting the real costs associated with running an effective and sustainable organization, including livable wages and quality benefits to recruit and retain quality staff, maintaining adequate facilities with current technology, and building sound financial and fundraising infrastructure.

Paul Beaudet is Associate Director of Wilburforce Foundation and a member of CEP’s Advisory Board.

There seems to be an increasing number of books and reports about philanthropy and nonprofits, most promising to improve the efficacy of those who follow their wise words. The best of these acknowledge the distinct challenges of philanthropic and nonprofit effectiveness, and modestly build on what we know – basing their conclusions on real data. The worst of them show little understanding of history, offering up concepts (often based on only anecdotal experience) as if they’re the shiny new cure-all, when they’re neither new nor a cure-all.

As Cynthia Gibson put it in a wonderful NonProfit Quarterly article: “What’s of concern … is the increasing number of reports or studies on so-called innovative ideas or models—or ways to assess impact—that have been generated by individuals who seem to have little or no concern about whether or not what they’re claiming as ‘the next best thing’ is really just ‘been there, done that.’”

Gibson notes that, “A review of the steady stream of studies and reports issued under the guise of innovation reveals much that is merely a restatement or repackaging of ideas and concepts that have already been acknowledged or are being used by people who’ve been working in the nonprofit sector for a while.”

So it felt like a real gift to see the release, last month, of historian Olivier Zunz’s Philanthropy in America. It is an impressively well-researched book that comes at a perfect time, offering an antidote to all who think that everything interesting in philanthropy was invented today, or yesterday (often by them). Turns out, much of what we often talk about as if it’s new – or not happening at all – has been going on in the U.S. for 100 years or more.

Although I was familiar with much (although by no means all) of the history Zunz recounts, I was struck by how helpful it is to remember where we’ve been as a country when it comes to philanthropy. As Alexis de Tocqueville said, “History is a gallery of pictures in which there are few originals and many copies.”

Reading Zunz’s book, I noticed seven examples of things that are often portrayed as new – or not done – despite the fact that this is not, historically, the case.

1. How often do you hear the lament that nonprofits never die, because the sector lacks the forces of “creative destruction” – to use economist Joseph Schumpeter’s term – that buffet the for-profit world? In a 2010 article in Harvard Business Review, Allen Grossman and Bob Kaplan write, “Apparently, Schumpeter’s cycle doesn’t operate in the social sector.” Yet, history offers evidence to the contrary. During the Great Depression, Zunz notes that “one-third of private charitable agencies in the United States disappeared” during a three-year period. (I’ve also argued that, to the extent that nonprofits have been more resistant to these forces, that’s partly the point of them – to operate outside markets.)
2. Heard a lot about “cross-sector collaboration” or, more recently, of the term “collective impact?” A Stanford Social Innovation Review article describes the concept as the “commitment of a group of important actors from different sectors to a common agenda for solving a specific social problem” and discusses the need for a “fundamental change in how funders see their role, from funding organizations to leading a long-term process of social change.” But Zunz recounts how the earliest major American philanthropists saw their role in precisely these terms, and he cites many examples over the past century of government, foundations, nonprofits, and companies working together to address serious social problems, such as the effort to fight tuberculosis in the early 1900s. He describes the work of the Russell Sage Foundation and nonprofits to combat the disease and then notes, “Other funding partners in the fight against tuberculosis came from business, labor, and government. Life insurance companies naturally invested in reducing mortality rates among their customers.” It is likely the case that such efforts remain too rare, but there are many historical examples worth understanding.
3. Today, that work by life insurance companies on tuberculosis might be heralded as “corporate social responsibility,” “blended value,” or, in the newest term for what appears to be essentially the same thing, “shared value.” But there is nothing new about companies seeking to do social good and make a profit – or the recognition that these goals sometimes go hand in hand (although quite clearly sometimes they don’t). Zunz recounts, for example, how the insurer “Metropolitan Life paid for a major study of tuberculosis in Framingham, Massachusetts, and underwrote a large educational campaign.”
4. What about policy and advocacy work – which so often gets described as if it is a new push or something that funders historically haven’t done? This is perhaps the most powerful part of the story Zunz tells: the fact that philanthropy and public policy have been closely connected since the earliest days of institutional philanthropy and the subsequent spread of “mass philanthropy” in the U.S. a century ago. Zunz describes the evolution of the law with respect to this issue, but what is clear is that the earliest major foundations sought to influence policy, recognizing that this was a crucial way to make change. “Philanthropists have invested their resources in the greater American fight over the definition of the common good. They have taken all sides in all the partisan encounters that have divided our society and have strategically intervened in essential debates on citizenship, opportunity, and rights.” Zunz argues that this activity has “enlarged democracy.”
5. And what of the push to move beyond transactional charity to influence systems and lives on a significant scale, or to combat “root causes” of social problems? Reading press coverage of philanthropy, it would be easy to conclude that, before the Gates Foundation, no one really cared if they were making a difference with their philanthropy. But there is nothing new about the quest to make a measurable difference, as Zunz recounts. He discusses the way Julius Rosenwald pursued a strategy of improving education for blacks in the South, or the influence of philanthropy on private colleges and universities to become much more focused on scientific research – and much more secular. Zunz cites a 1907 Outlook magazine article by Daniel Coit Gilman, a founding member of the American Social Science Association and a president of Johns Hopkins University. “Gilman underscored the new philanthropy’s insistence on long-term solutions to social problems instead of temporary relief for the destitute. High among its goals was the search for root causes.”
6. How about PRIs (Program Related Investment) or the broader concept of “impact investing?” Zunz tells the story of the creation in 1967, by nine foundations, of the Cooperative Assistance Fund to invest in minority businesses. To their credit, the thoughtful present-day proponents of this kind of approach, such as Jed Emerson and Antony Bugg-Levine, are quick to acknowledge its history – but much of what is written by others seems ignorant of what has come before.
7. Finally, how many times have you heard that nonprofits don’t know how to market themselves? And yet American history includes many examples of brilliant marketing, fundraising, and education efforts led by nonprofits. Zunz describes how nonprofits mobilized mass participation and action for positive effect in the fights against disease. He also describes the successful campaigns to encourage giving that accompanied the birth of the “community chest” and the community foundation, and the “democratization” of philanthropy. Indeed, the country’s high level of charitable giving is the result of savvy marketing by nonprofits.

Zunz himself does not make the connections to the current debates about philanthropy: he is a historian. He simply recounts the history – I am not doing justice here to the breadth and depth of what he has written – and does so thoroughly and brilliantly.

So why does it matter that so much of what we talk about as if it is new in fact has a long history?

I think it matters, first and foremost, because there is so much to learn from these examples. But I also think it matters because philanthropy and the non-profit sector seem to suffer from a sort of self-esteem problem, accompanied by (or perhaps resulting from) a strange case of amnesia, that doesn’t serve us so well.

Perhaps this is an odd observation for me to make – as someone who believes deeply that philanthropy and the nonprofit sector should push to be much, much more effective than they are today – although I’d say the same of government and business. But I think the push for effectiveness will itself be much more, well, effective, if we remember what’s been tried and what’s worked – and some things clearly have – and if we remind ourselves of the historical significance of nonprofits and philanthropy. And, in this way, Zunz’s book really is a gift. He writes:

From Andrew Carnegie to Bill Gates, and from ordinary people who purchased Christmas seals to fight tuberculosis to those who wear pink ribbons to battle breast cancer, the nation has come to view philanthropy as both a quintessential part of being American and another means of achieving major objectives …. Together they have forged a philanthropic sector that donors, beneficiaries, and the state recognize as a critical source of ideas as well as funding.

Obviously, there is also much that is sobering in Zunz’s history. He tells of considerable timidity on the part of major foundations and their leadership at various important moments. It was also striking to read of concerns about philanthropy’s effectiveness that feel all too much like the concerns I – and many others – have expressed much more recently.

An example: Baptist minister Fredrick Gates, who advised John D. Rockefeller Sr., had worried about what he called “scatteration” almost a century ago. Edwin Embree, who had worked at the Rockefeller Foundation and the Rosenwald Fund, echoed those worries in 1949 in Harper’s, discussing “the sprinkling of little grants over a multiplicity of causes and institutions.” So while that does not make it wrong for me or other advocates for effectiveness in philanthropy to push for focus, as so many of us have, we’re better off understanding fully the long history of this discussion (and, quite honestly, I did not).

Philanthropy in America: A History is ultimately inspiring – and it is an indispensable guide to where we’ve been. It can help us figure out where we need to go – and even how to get there. And it’s a humbling reminder of the truth in Harry S. Truman’s statement: “There is nothing new in the world except the history you do not know.”

Phil Buchanan is president of CEP. To read other blog posts by him, click here.

Strategy is something that people in philanthropy seem to talk about a lot.  What they do, though, may be another matter.  In recent months, I’ve had a number of conversations with philanthropic leaders who admit that they’re still somewhat perplexed when it comes to creating and implementing a solid strategy for their investments.

• A senior consultant was asked by two large national foundations to create a strategy for them, but when he presented that strategy, the funders said they were “only interested in how many people we reached”—outputs, in other words.  When the consultant tried to emphasize the importance of linking those to a larger strategic framework, they responded, “We only care about results.”
• The deputy director of a large regional foundation, charged with helping each of her program staff members create a grantmaking strategy, expressed frustration about their tendency to “drill down immediately to tactics,” rather than grappling with clarifying the goals and rationale for those efforts first.  She wondered how to help them understand that “without the why, they won’t be able to assess whether the tactics they decided to use were effective.”
• A foundation official speaking at a conference said his foundation’s strategy was to “end homelessness in their community.”   An audience member, also a foundation executive, responded by observing that this seemed to be a goal, rather than a strategy, and that the two seemed to increasingly be “conflated in ways that lead to confusion about what philanthropic institutions are doing, how and why.”

These anecdotes are hardly evidence of a trend, but they’re a few of many examples I’ve seen indicating that the concept of strategy remains murky, despite all the publications and tools available to help people who work in philanthropy dispel that cloud.

But why? It’s hard to say for sure. Perhaps it’s because creating a strategy and then rolling it out in ways that will achieve impact are all different parts of one complex concept—and none by themselves are easy to do, let alone in combination.  Another reason may be that the array of sometimes expensive and confoundingly complex strategic planning products available can leave even the smartest foundation officials scratching their heads in confusion.  Others point to the influx of a new set of players in philanthropy, including young people or those whose backgrounds make them more interested in doing than in navel-gazing, which is sometimes how strategy is characterized.

Perhaps the most commonly cited reason for funders to eschew more intentional and rigorous strategy development is that there’s little incentive for them do to so, given that philanthropic institutions tend to operate with few formal accountability structures, especially those that are externally imposed.  As the public, however, becomes less enamored with institutions, particularly those that are seen as reluctant to adopt the open source ethos that’s becoming a cultural norm, there will be more, not less, demand for accountability and transparency from even the most closed-door organizations.  And unlike some foundations that define transparency as publishing an annual report or articles describing what they’re supporting, the public, especially grantseekers, have long known that real transparency is when funders are clear about what they’re doing, the decision making criteria they’re using to make investment decisions, and how they’re going to assess themselves in those efforts.  In short, people want to know:  What’s your strategy and why?

Fortunately, strategy isn’t really that complicated.  While it does require the ability to think logically and articulate a rationale as to why a particular path is chosen over another, it isn’t rocket science.  Nor should it take forever and serve as a proxy for actually doing something. How many times have you heard ‘We’re revising our strategy’ from foundations that you thought did that already last year… and the year before that… and before that…?

What strategy can do, however, is make a better rocket—and one that lands where it should. And who doesn’t want that?

To help make things a bit less mystical, and thus, more likely to be applied in daily practice, we might take a page from the book of some wise people who were developing effective funding strategies long before the advent of the strategy gurus.  One of those people was Andrew (a pseudonym), with whom I had the good fortune to work.  Andrew came to philanthropy after organizing thousands of women in one of the country’s poorest communities to secure child care subsidies they needed to stay employed—a result that led to significant changes in national welfare policy.  In addition to serving as the president of a foundation, Andrew also was the senior vice president at a family foundation with a national focus.

It’s worthwhile to note that Andrew didn’t have an Ivy League degree, hadn’t worked at a multinational consulting firm, and had probably never even read a book about philanthropic strategy.  He was, in fact, deeply skeptical of foundations and their capacity to make a difference, but was, at the same time, roundly viewed by his peers as a brilliant strategist because of his ability to home in on difficult problems with laser-like focus and get results.  He was also able to project out longer-term visions and predict which would have traction, but only as a function of rigorous evaluation and assessment—processes he built into every program he oversaw.

Lucky for those us who worked with Andrew, he was an excellent teacher from whose wisdom we benefitted.  While none of us would call ourselves strategy experts, we’ve all been able to apply what we learned from him to our work with different kinds of foundations—traditional/private, family, corporate, community, and technology.  Serving in a variety of capacities at these organizations, we’ve developed and implemented strategies that have had legs and longer-term impact (we know, because we learned the importance of building in metrics and benchmarks to evaluate that way before they’d become philanthropic buzzwords).

We’ve also learned a lot about what separates a good strategy from one that’s not so good—mostly because we’ve experienced our share of failures—and what strategy is and isn’t.  Most importantly, we learned a process through which we can create effective strategies—one that’s served us and the institutions for which we’ve worked well.

The basic tenets of that process are fairly straightforward and some have been discussed many times before, but they bear repeating.  So, in true open source fashion—something that Andrew also practiced before it landed in the zeitgeist—they are shared below.

Developing an effective strategy starts with an open mind and a willingness to step back and explore all options.   When developing strategy, it’s important to assume a position of explorer, rather than expert.  Andrew, in fact, tended to hire people who had a broad range of experience as generalists able to see the big picture and flesh that out with important details, as well as the ability to identify the gaps, assets, opportunities, and challenges associated with issues or problems.

They were also skilled at exploring and answering questions such as:

- What are the most important issues in a particular domain?
- What are the debates occurring among various practitioners and theorists about those issues?
- What kinds of efforts are being tested in communities?
- Which are promising?
- What field-building is needed to support those efforts?
- What does the data and research say about the issue/projects/trends?

People working for Andrew were asked to provide answers to those questions, but in a way that was as unbiased and objective as possible—and, preferably, based on information that had some evidence behind it.

This approach was in contrast to what occurs in some philanthropic institutions, which usually involves one of two scenarios.  The first involves hiring experts on specific subjects or issues as program staff and then charging them with developing programs based on that expertise.  The second is commissioning outside consultants to conduct environmental scans but then using only the part of those reports that “fit” with the funder’s predilection for a particular strategy as the rationale for pursuing that strategy.  Missed in both of these approaches is an awareness that deep knowledge of a particular subject can sometimes be accompanied by deep biases about what’s “best”—a stance that mitigates the likelihood of identifying alternative, new and/or more effective options for effective strategies.  Even experts, after all, don’t know everything and, in fact, can be saddled with more misguided preconceptions than the novice.

Other philanthropic institutions simply don’t give program officers the space and freedom to conduct serious and thoughtful analyses of the issues or domains in which they’re working.  A colleague who recently interviewed for a job at a foundation, for example, was asked by senior officials what she would fund if she assumed oversight over a particular program.  When she replied that she couldn’t answer that question thoughtfully because she hadn’t had the chance to look more deeply at what the field needed, what the best approaches were, and/or what was really working, the interviewers were astounded, having assumed that she’d have her strategy set in stone before she even started.  Fortunately, that didn’t deter her from getting the job, and, to the foundation’s credit, they allowed her the room to dig deeper, which led to the development of two new programs that were later nationally recognized as being instrumental to moving a policy agenda.  Those results, in turn, spurred the institution to incorporate this process across all program areas—one that’s still used currently.

Create a template for strategy development that’s supported by research, analysis, and evidence.  Inherent in Andrew’s strategy development process was a template that included the following elements: a comprehensive overview of the issue/field/area being examined (rather than just the parts that interest the program officer or its executive staff); a compelling and evidence-based rationale for why the foundation should be engaged in this issue/field/area (and not just because the program officer or executive staff think it should); a discussion of the foundation’s historical interests, experience, and/or mission and how it relates to the issue/area/field (and if there is no relation, why there should be now); a set of goals the funder could consider pursuing, as well as objectives for each of those goals; and the strategies that would be best to implement in meeting those goals and objectives.  An essential piece of each of these components was describing, in detail, the why behind them.  Why should we do this and not that?  And on what basis are we making those decisions?  What are the pros and cons of each and why?

Goals are related to strategy, but they’re not the strategy.  ‘What would success look like’ isn’t a throwaway question, and it’s been reiterated in numerous strategy how-to guides, but it’s surprising how many funders still overlook the importance of this question as a critical starting point for creating effective strategies.  As one foundation vice president remarked, “I tried to get my younger staff members to think about the goals of their programs before coming up with strategies, but they stared at me like I was from Mars,” saying that “talking about the goals was too academic and airy-fairy.”

The distinction between goals and strategy isn’t just a semantic issue; they’re different concepts.  Goals are what we are striving toward; strategies are the way we get to them.  Goals should be the starting point, but, often, there’s a tendency to rush to the toolkit.  Skilled strategists argue that it’s almost impossible to develop effective strategies by starting with tactics, activities, or even strategies themselves. Instead, the best strategies start with the end goal at the top of the pyramid, with the rest flowing down from that, including objectives, strategies to meet those goals, and then activities or tactics.

Tactics/activities have to be linked to strategies.  It’s natural for people to want to jump right into the activities but doing so without attaching them to the why will most likely lead to disappointment and, ultimately, failure—and a lot of wasted time and money.  That tendency isn’t limited to grantseekers; funders are equally as susceptible to fixating on the do without linking it to a strategy or goal.  But some funders have the opposite problem; they focus only on the issue itself, providing eloquent, academic arguments and analysis about poverty, education, or other “problems” and why they need to be addressed but then never say what, exactly, they think should be done about them.  It’s rare to see an artful and logical strategy linking both tactics and rationale, but when done well, this weaving offers a clearer picture of not only what funders are supporting, but why, how, and to what end—the essence of good strategy. 

Benchmarking and measurement aren’t just for grantees; funders should be using them in evaluating their own program planning and implementation efforts.  While there has been a lot of attention toward helping grantees build in metrics and benchmarks so they can be more readily evaluated, there has been less attention paid toward the need for funders to do likewise when developing and implementing their own program strategies. (Some of us, in fact, believe that considerable tension between grantees and funders could be reduced if funders were held to the same accountability standards to which they hold grantseekers.)

An important part of the template, therefore, is outlining, clearly, and preferably in quantitative terms whenever possible, how program staff is going to measure or assess each of the strategies and/or activities that will be part of the program.  Each element, for example, should be accompanied by indicators that answer the questions:

- What will progress look like to us—the foundation—not just the grantees—in terms of our ability to do what we said we were going to do and how will we know?
- What will we use to determine whether we’ve met our program objectives?
- How can we “operationalize” the objectives with indicators?
- What’s the timeline we anticipate to meet those objectives?
- Which can be done sooner and which require a longer time period?

Strategy isn’t a box; it’s a membrane.   People tend to bristle at the notion of indicators or metrics because they can feel limiting or as if they’re “boxing us in” and, indeed, in some ways, they are because they’re a prompt for “concretizing the vision” in ways that invite more accountability for what’s supported and what isn’t.  But programs don’t operate in a vacuum; times change as does the context within which programs are operating.  A strategy focused on long-term change around a particular issue, for example, may need to be more flexible and/or tweaked if an opportunity suddenly emerges that may not fit the original template but is one that would clearly enhance the likelihood of added impact.

Thus, while it’s important for funders to have a solid strategy behind their efforts, it’s equally important for them to review that strategy on a regular, consistent basis to see what’s working and what’s not—a process that is helped by having good progress indicators in place.  In Andrew’s model, we were asked to develop this template with a three-to-five-year timespan but with the understanding that we would, every six months or so, re-examine it to assess the progress wewere making in the context of the indicators we’d stipulated.  This process allowed us to see where there was a need for tweaking or, in some cases, making more profound changes to the original strategy.

Strategy includes an assessment of what other investors are doing.  Like many of us, funders can easily become wrapped up in their own sense of importance and/or buried in their own cultures to the extent that they forget to look around and see what others are doing.  As part of Andrew’s process, we not only shared our strategy papers/templates with other staff members but also with peers at other foundations to get their feedback and insights as to what they thought we should be doing, either in ways that would leverage or complement their efforts or address gaps they were unable to resolve. While this kind of collaboration is gradually increasing in philanthropy, it’s still relatively rare for funders to proactively engage their colleagues in open conversations about their strategies, despite the potential for enhanced learning—something that needs to change, particularly at a time of decreased resources.

Theories of change are nice, but they’re not enough.  When used appropriately, theories of change can be very helpful in developing effective strategies, but they aren’t a proxy for strategy—a trap that some funders fall into when describing what they’re doing.  Theories of change, generally, don’t usually include the how or why behind a problem or issue, nor do they explicitly detail tactics or strategies.  Rather, they offer a set of assumptions about how an investor views a particular issue or problem and how it should be addressed—a rubric from which the rest of a strategy can emanate.

Good strategies find the nexus between feasible investment options and institutional focus.  Conducting a comprehensive exploration process to pinpoint areas of possible investment is only one part of good strategy.  The other part is matching these findings with the institution’s overall focus, history, or legacy—a step that’s sometimes ignored.  A foundation that’s been historically focused on higher education, for example, isn’t necessarily going to eagerly embrace a community-organizing or ham-fisted advocacy strategy.  A funder who’s supported nonprofit technological innovation isn’t going to view a strategy focused on capital endowments as a particularly compelling way to leverage their experiences or investments.  A good planning process, therefore, will highlight the intersection between a funder’s interests and experience in ways that will help leverage the latter more strategically.

The process to develop strategy should inform, not shame.  Just as it’s hard for grantees to tell funders about failures, it’s hard for funders to admit them, largely because few institutions invite that kind of candor, nor is there much incentive for it.   Developing effective program strategies can and should be opportunities for strengthening communication and collaboration not only within philanthropic institutions but across them.  When program officers are encouraged to present their strategies to their colleagues in a atmosphere that’s intellectually challenging, yet supportive, it can lay the foundation for more openness about their progress as the strategy unfolds, including what didn’t work and what did and why—information that’s critical to deciding whether the strategy should change.

 * * * * * * * *

These are just a few of the pearls of wisdom gleaned from Andrew and others like him who’ve since helped to prod funders into being more strategic about their efforts.  There are certainly many more.  What’s important to remember, though, is that none of these require a Ph.D. to understand or integrate into practice; they’re merely a set of guideposts that can help lead to the creation of better programs, and ultimately, results.

Those kinds of guideposts are going to become even more important as funders operate in an environment in which the demand for more accountability is growing across a wide spectrum of institutions and domains, as well as in a world in which the problems facing philanthropy are more complex than ever before.  That context suggests funders will need to be even more intentional about clarifying what philanthropic investments they’re making and why and with what anticipated results.  Integrating a more thoughtful process for developing strategies with a higher potential for success can be the first step toward meeting that challenge.  Thankfully, that isn’t rocket science.

Cynthia M. Gibson, Ph.D., is an independent consultant for a wide range of national nonprofits and foundations who serves as a strategist, thought leader, and writer.

The following blog post is adapted from a talk presented at a meeting of the Grantmakers of Oregon and Southwest Washington.

As Suk Rhee mentioned in her introduction, I am a native Oregonian, so I know that there is no better place than the Pacific Northwest. And I am so happy to be here with you – funders who are committed to making the region even better;

• More economically prosperous;
• with better opportunities for all children and stronger schools in which they can learn and grow;
• with its natural beauty protected from pollution and destruction;
• with habitats for wildlife preserved;
• with fewer homeless and abused;
• with fewer struggling with mental illness and disease;
• with discrimination – whether based on gender, race, sexual orientation, or disability – stamped out.

These are among the very toughest challenges. Yet, if you pick up the paper or read some of the increasing number of books on philanthropy, you might think it’s not so hard.  Just apply “business thinking” or “market-based solutions,” and we’re all set.

Problems solved.

In their influential 2008 book, Philanthrocapitalism: How the Rich Can Save the World, Matthew Bishop of the Economist and his co-author Michael Green argue that a new breed of “philanthrocapitalists” are working to “apply the secrets behind their money-making success to their giving.” (As if this idea never occurred to Carnegie and Rockefeller.)

They write:

“While some are skeptical about the invasion of the M.B.A.-enabled executives in suits into the Birkenstock world of charity, many philanthrocapitalists believe that the world of giving could benefit at least as much as business from a bigger role for professional intermediaries and advisors, and from the sort of transparency and accountability that exists in financial markets.”

Did I mention that this book came out in the fall of 2008? Where is Lehman Brothers when you need them? Bishop and Green thought they were really on to something, and they’re thoughtful, smart guys who meant well.

But you know charity is working on the toughest problems. If business and government could solve the problems I listed at the start, they wouldn’t exist. You know, because you do this work every day, that no sector owns the concept of effectiveness, and that there is much work in the nonprofit sector that is strategic, data-driven, and rigorous, whether those doing it are wearing Birkenstocks or loafers.

You know, because you are living it, that though people look to you and your resources jealously, they pale in comparison to the challenges you confront.  Here is some context: Annual giving in this country is $300 billion. Total state and federal spending is an estimated $5 trillion.

You know all too well, because you are experiencing it right now that you cannot possibly fill the gaps created by slashed government spending and increased need. But you also know the nonprofit sector has a crucial role to play – one that is separate and distinct from corporations and government.

And, you know, because you live on this earth – and perhaps because, like me, you are a customer of a big national bank (and wondering why), or of the local cable company – that corporations have no greater claim on effectiveness than anyone else.

As Jim Collins, author of Built To Last and Good To Great,  has said, “We must reject the idea – well-intentioned, but dead wrong – that the primary path to greatness in the social sectors is to become ‘more like a business.’”

So let’s cut through the cloud of rhetoric that has descended on philanthropy like ash from Mount St. Helens. Let’s talk about how hard it is to be effective in philanthropy. And let’s talk about what it takes to be effective in philanthropy.

I don’t have the secret formula. No one does.

What I can offer you today may well even sound like what you already know.  (I promise to try not to pretend otherwise!) But I hope that I can at least help you understand more about why doing what we already know we need to be doing is so hard.

So let’s talk about what foundation effectiveness looks like. If you want to create the most positive impact with the resources you have – and I am going to go on the assumption that if you are here, you do – then how do you make that happen?

I think it requires four things:

• Clear goals
• Coherent strategies to achieve those goals
• Disciplined implementation of those strategies
• Relevant performance indicators to assess progress

Again, I want to repeat that these are not original thoughts nor fancy new ideas – and the challenge is not in understanding that they are necessary for effectiveness, it is that they are so hard to do right.

Clear goals

Defining clear, specific goals is tough.  If you’re Howard Schultz, and you’re running Starbucks, the task is clear: make a profit selling coffee.  Execution might be hard, but defining the goal is not.  Sell as much coffee as you can.  Package it up in different sizes and flavors and make people feel they have to have it. You might, I hope, increase the degree of difficulty by saying you want to do it in a responsible way, with good labor practices and sourcing, and so on. But, still, the goal is straight forward.

In foundationland, it’s much tougher. How do you choose goals?

It’s subjective, after all. Values-laden.

Plus, how do you choose just one or two goals or even several, when there are so many pressing social problems, and when those problems are so interrelated?

A wonderful former foundation staff member who I had lunch with a year or so before he died once recounted to me the story of being asked for advice by the new CEO of the foundation where he worked.

“What is the greatest mistake you fear I will make?” the new CEO asked.

The answer my lunch companion gave, at least as he recounted the story, was this:

“The greatest mistake you will make is that you will be drinking your coffee and reading the paper, and you will be deeply moved by something you read. And you’ll walk into the foundation offices and you’ll say, ‘Let’s investigate this issue. We have tremendous resources. There must be something we can do.’ And you will set in motion a process that leads to the creation of a new programmatic area at the foundation.

And, then, six months later, you will be shaving, thinking about another pressing social problem.  And you’ll do the same thing.

And then you’ll look out over the foundation five years from now, or maybe ten, and there will be so many different programs, in pursuit of so many different goals, you will realize that you have squandered the opportunity that your scale offered – to really make a difference on an issue.”

And that is precisely what occurred at this particular foundation. The CEO made exactly the mistake my former colleague predicted he would.

It’s hard not to.

When Jim Collins spoke at our conference in Los Angeles a couple of years ago, he said this:

“Disciplined action begins with piercing clarity about what you choose to not do.  In a world awash with opportunity for contribution, it’s what we choose not to do – because there is so much to do.”

So ask yourself:

• Are your goals specific, focused, and clear?
• How many are there?
• Are they goals that are reasonable for you to believe you can make a difference toward, given your resources?
• How aligned are your board and staff?
• If each person associated with the foundation wrote down the goals, would they be the same?

It seems simple.  But all too often, the alignment just isn’t there. Our research shows that a CEO’s perception that there is goal alignment among staff and board is crucial.

So, whether your foundation has one staff member or 30, job one is to get clear on your goals.

Coherent strategies

If clear goals are the “what,” strategy is the “how.”

Everyone loves “strategy.”  Everyone has one.  But do they, really?

First, let me say that strategy plays out differently in philanthropy than in business, because there are no competitive dynamics for private foundations. In business, it’s all about “unique positioning.” But if I can make tremendous impact at my foundation by doing exactly what your foundation is doing, why wouldn’t I?  I wouldn’t demur, by saying, “No, I don’t want to fund those vaccinations because it’s not our ‘distinctive position’ to do that work.”

So how to define strategy in philanthropy?

We at CEP define strategy as:

A framework for decision-making that is

1) focused on the external context in which the foundation works, and

2) includes a hypothesized causal connection between use of foundation resources and goal achievement.

But in our research, we see a disconnect between the rhetorical embrace of strategy and the reality of its actual use. This disconnect exists at both private foundations and community foundations.

Strategy in philanthropy requires a relentless focus on the logic of how you will achieve your goals.  It is about data-driven decision making, rooted in analysis and a theory of how the foundation’s efforts can contribute to the desired change. Wherever possible, it’s informed by evidence of what works and what doesn’t, the more rigorous the better. It’s also influenced by feedback loops so you can constantly iterate and improve your strategy based on a changing context.

Strategy isn’t about deciding what works on high, about being arrogant or top-down. The best strategists are always questioning assumptions – theirs and others – and getting feedback.

Take the example of the Stuart Foundation, with roughly $300 million in assets, making grants in California and the Pacific Northwest.  In their child welfare work, the foundation focused on changing outcomes for former foster kids in California.

The conventional wisdom was that older foster kids couldn’t get adopted:  couldn’t find loving families or people who would assume some responsibility. The folks at Stuart consulted widely with those on the ground, including grantees, government officials, funders and foster kids themselves. They found reason to believe this assumption might be flawed, and tested a strategy that led to older foster kids getting adopted or connected to a caring adult. The data showed that the strategy worked, so they expanded the work.

The Foundation, joined by other foundations, also invested in the kind of supports at state universities that other kids would take for granted as coming from their families. Graduation rates in some cases for kids in these programs were better than the general student population.  The Foundation also recognized that better data systems were needed to track these kids and figure out what is working. So it did something too few foundations do: it invested in a data system.

The Stuart approach became a national model.

That’s good strategy. It’s incredibly difficult, but it can produce remarkable results.

Disciplined implementation

But Stuart didn’t just have a good strategy.  It had good implementation.

This is where so much falls apart.

We at CEP see this all the time. Over the past nine years we have surveyed 40,000 grantees of more than 250 foundations, developing a huge comparative dataset that we can mine for our research and for the Grantee Perception Reports we provide to individual foundations, such as Northwest Health Foundation and MJ Murdock Charitable Trust, which have both participated recently.

We see foundations that work very productively with their grantees to achieve shared goals, implementing their strategies well. But we also see foundations that undermine their effectiveness by operating in ways that are not supportive of grantees;

• they compromise the relationship and then, inevitably, their ability to hear what is really going on;
• they place requirements on grantees that don’t serve a purpose;
• they fail to learn from those doing the work on the ground;
• they fail to communicate clearly about their goals and strategies, and then somehow expect grantees to be able to implement against them.

We see foundations that say they provide capacity building assistance to nonprofits, that that is crucial to their strategy, but they don’t do it in the ways our research shows are required to make a difference.  Rather than doing the kind of comprehensive or field-focused assistance that actually helps grantees, they settle for “drive-by assistance” that may do as much harm as good.

More broadly, foundations frequently don’t commit the resources that would be necessary for implementation of their strategies.  In our research, this emerges as the biggest perceived barrier to strategy implementation.  The most effective foundations recognize that major change requires major resources. They also understand that it almost always requires resources beyond what any one foundation possesses.

Lately there has been a lot of chatter about the concept of collective impact: I got an email promoting a webinar (cost: $49) that read:

“Recently published in the Stanford Social Innovation Review …. Collective Impact is an approach to solving social problems that’s based on the idea that no organization acting alone can solve large-scale issues.”

Wait, didn’t we know this already?

Effective foundations have recognized for decades that achieving significant change requires working together to make changes with other funders and with the grantees on the ground. All the great examples of impact that foundations can lay some real claim to, from the Green Revolution to reducing tobacco use to the end of Don’t Ask, Don’t Tell, involve many institutions, funders, nonprofits, sometimes other actors including companies and government, working together, under the banner of a shared strategy, coordinating implementation.

There is nothing new here.

That’s why CEP and the Monitor Institute are working together to provide a tool that Monitor Institute created, called the Strategy Landscape Tool, to groups of funders who are working toward the same goal.  This tool allows these funders to see who is funding what, by strategy, rather than by the less helpful categories by which grantmaking is typically grouped. We’re providing these for foundations working toward shared goals in specific fields or, sometimes, as for funders in Detroit, for those pursuing improvement in a specific community.

Steve Schroeder, the former CEO of the Robert Wood Johnson Foundation, has argued that “Execution trumps strategy.” I think what he means is that strategy is meaningless if it isn’t well-implemented.

Relevant performance indicators to assess progress.

There has been real progress on this front in the past decade.

We see, in a survey we conducted this year of CEOs of foundations that make more than $5 million in grants annually, that assessment of foundation performance is a high priority to CEOs.  They believe much progress has been made in the last decade but that more needs to be done.  We also see that foundations are using a broader range of indicators than they were when we first studied this issue a decade ago.

This is good news.

Still, there is so much confusion about assessment. Lately, there has been a bit of a backlash against experimental design and randomized control trials. But rigorous experimental design is a powerful evaluation approach when applied well. If you are going to put major funding behind a particular strategy then you should know whether it works or not. If it’s new, then support finding out whether it works.

If something has already been shown to work, then don’t assess it all over again. Take the New York State Health Foundation, whose CEO, Jim Knickman, is on CEP’s Board of Directors. The Foundation focuses on improving clinical care and patient outcomes for diabetes – doing so by supporting the proliferation of treatment approaches that have already been proven effective. Rather than funding their own massive evaluation, they have relied on the work of others who have already shown what works – and their assessment now focuses on their ability to spread what works.

So you don’t all have to fund massive evaluative studies, but it’s irresponsible not to pay attention to what is known, and not known, about what works – and to act accordingly.

Another problem is that so much assessment today puts the foundation’s needs in front of the nonprofit grantee’s needs.  But assessment should also support the work of those on the ground, giving both you and them the information to assess and improve.

In his important new book, Leap of Reason, Mario Morino writes:

“I know many nonprofit leaders who are not managing to outcomes but are strongly predisposed to do so.  They inherently know what their outcomes are and very much want to assess and manage to them.  But they are severely hamstrung by the lack of available funding to do this hard work. … At minimum funders should be supporting efforts to help nonprofits to …. (a) track the outcomes of those served; (b) undertake at least basic analysis of this information; and (c) identify how they can use the information to learn and improve their programs over time.”

When it comes to assessment, I think the first step a foundation can take is to open itself up to feedback from the outside,  recognizing that it is surrounded by those who are predisposed to say what they think foundation staff want to hear.  To have any meaning whatsoever, this feedback must be collected by a third-party that is recognized and trusted for its independence so that the feedback is candid; and it must be put in a comparative context.  Without comparative data, it is impossible to make sense of what is a good result, what are relative strengths and weaknesses.

At the Center for Effective Philanthropy, we have worked hard to create these feedback loops.  Our Grantee Perception Report has been used by foundations as big as Gates as well as those with a couple of million dollars in annual giving. Our Applicant Perception Report captures the feedback of those who were declined funding. Our Donor Perception Report gives community foundations the opportunity to understand the views of their donors. Our Stakeholder Assessment Report taps into the perspectives of policy makers and field and community leaders. Our YouthTruth project taps into the voices of those who should matter most – the people whose lives a foundation seeks to improve. YouthTruth does this for education funders through surveys of students in high schools and, soon, middle schools – and its made a powerful difference to schools, districts, and funders.

In every case, the perceptual data is put in a comparative context to make it meaningful.

And we see that foundations are improving, to a statistically meaningful degree, when they repeat tools like the Grantee Perception Report.

As you assess, remember that what you learn often has broader relevance. If you know something about what works, or what doesn’t – share it, so others can learn from it. In my view, it’s morally indefensible not to.  Again, there is no competitive dynamic here – we’re all trying to make a positive difference.

Clear goals. Coherent strategies. Disciplined implementation. Relevant performance indicators.

Not radical concepts.

But incredibly difficult – it is much, much harder to be effective in philanthropy than it is to be successful in business.  Just ask some of the folks in Silicon Valley who have recently made the transition from business to philanthropy.

Not radical concepts – not new concepts either.  In their very good new book, GiveSmart, Tom Tierney and Joel Fleishman imagine Andrew Carnegie and Bill Gates having dinner, writing, “They would quickly discover how much they had in common.”

The authors speculate that as

“rigorous, disciplined, and deeply strategic” men, “the industrial baron and the software tycoon would be highly compatible.”

They write,

“If Gates were to mention ‘strategic philanthropy,’ ‘social entrepreneurs,’ or ‘scaling what works’ in the course of the conversation, Carnegie might not recognize the phrases but he would immediately understand the concepts.”

So the concepts are neither new nor radical, but they’re incredibly hard to act on, each day.

Each one of you here today has a role in making decisions about how resources are used to influence change for the better in this amazing region we call the Pacific Northwest.  How you do that work, each day, the discipline and clarity you bring to the task…it matters.

Foundations play a role other actors in our society cannot, or will not.

When they do it well, the results can be stunning.

So do it well.

Phil Buchanan is President of the Center for Effective Philanthropy.

I am pleased to announce a new partnership between YouthTruth and The New Teacher Project, which will bring student perspectives to teacher performance evaluations. See the video below for details or read the press release.

Valerie Threlfall is Vice President – YouthTruth Initiative at the Center for Effective Philanthropy.

In a recent data point post, we shared that the most significant factor program staff consider when determining what type of assistance beyond the grant to provide is specific requests from grantees. In our research, program staff also told us that the most frequent assistance beyond the grant request they receive from grantees is help raising money from other sources.

For our survey of 103 program officers at foundations with $100 million or more in assets, we listed a range of ways foundations could assist their grantees in obtaining additional funding from other sources, and asked respondents to select all the ways in which they do so.

The typical foundation provides just 22 percent of its grantees with assistance securing funding from other sources. The most frequent way program staff assist grantees in obtaining additional funding is by suggesting other funders. But, grantees do not rate the impact of this type of assistance much differently than not receiving any suggestions at all. Perhaps this is because most foundation grantees are already well aware of other potential funders.

The typical foundation goes beyond simply suggesting other funders for only 12 percent of its grantees. However, when foundations do more, either by introducing grantees to other funders or attending meetings with other funders, it makes a difference. Grantees rate the impact of this assistance securing funding higher than grantees not receiving these activities.

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What is the current state of assistance beyond the grant at large foundations? For a fuller exploration of nonmonetary assistance, see the report More Than Money: Making a Difference with Assistance Beyond the Grant written by Ellie Buteau, Ph.D., Phil Buchanan, Cassie Bolanos, Andrea Brock, and Kelly Chang.

Ellie Buteau is Vice President – Research at the Center for Effective Philanthropy.