Foundations Find Benefits in Facing Up to Failures

By Stephanie Strom

Among the reports on a coffee table in the Carnegie Corporation’s reception area is one on the foundation’s efforts to help Zimbabwe overhaul its Constitution and government.

It gets straight to the point: “This is the anatomy of a grant that failed.”

Just a few years ago, it would have been astonishing for a foundation, particularly one as traditional as Carnegie, to publicize a failure. Today, though, many of the nation’s largest foundations regard disclosing and analyzing their failures as bordering on a moral obligation.

“There’s an increasing recognition among foundation leaders that not to be public about failures is essentially indefensible,” said Phil Buchanan, the executive director of the Center for Effective Philanthropy, which advises foundations. “If something didn’t work, it is incumbent upon you to make sure others don’t make the same mistake.”

The James Irvine Foundation recently posted a report on the failure of a $60 million program aimed at improving after-school programs in five California cities and its efforts to change course to salvage some of its investment.

“It is a complicated and difficult story, for it reveals numerous shortcomings on our foundation’s part,” wrote James E. Canales, the foundation’s president and chief executive, in a foreword to the report.

In an interview, Mr. Canales, who was part of the team that conceived the program, said, “Given the emphasis in foundations these days on communication, transparency and accountability, it just seems to me that you aren’t going to be credible if all you talk about is your successes.”

A new generation of leaders at established foundations and at new foundations endowed with the wealth of high-tech entrepreneurs are partly responsible for the shift toward greater disclosure of foundation failures, said David Hunter, a consultant and former head of evaluation at the Edna McConnell Clark Foundation.

“Billions of dollars were made by relatively young people who never grew up with the notion that they shouldn’t be accountable because they were totally accountable to their investors,” Mr. Hunter said. “Disclosing problems was never a debatable issue for them.”

Foundations have published mea culpas in the past. Ask about foundations’ failures, and a foundation official will typically cite the Annenberg Challenge, a $500 million effort by the Annenberg Foundation in the 1990’s to improve public education. It was matched by $600 million from other foundations, businesses and universities. Although Annenberg achieved some successes, it cited a variety of “disappointments” caused by its failure to anticipate changes in local school policies and rapid turnover in school leadership, as well as the result of spreading its resources too thin.

In 2003, the W. K. Kellogg Foundation published a report on the demise of an organization, SeaChange, that it helped underwrite with $735,000. SeaChange’s goal was to use technology to match social entrepreneurs with donors and investors.

But an independent evaluator found that SeaChange had lacked a strong business plan, that it had hired senior managers before it had anything for them to manage, that board members and staff could not define a social entrepreneur, and that the chief executive’s charisma had masked shortcomings in his management skills.

SeaChange was finally merged into another nonprofit.

“This isn’t a report about the drama of some failure of an organization,” said Thomas Reis, the foundation’s program director. “It’s really more about a rich learning experience about management that I felt compelled as the grant maker behind it to share with my colleagues here at the foundation and also with a broader audience.”

Doug Nelson, president of the Annie E. Casey Foundation, said he was surprised by how much talk was generated by its first report in 1995 on a disappointing program that tried to change the ways cities delivered services to disadvantaged children.

“It was considered path breaking, innovative and maybe a little foolhardy,” Mr. Nelson said, “and the attention it drew was a little bit of an indication of the defensive posture among foundations at the time.”

However, Paul Brest, president and chief executive of the William and Flora Hewlett Foundation, and Mr. Canales of the Irvine Foundation have made it their mission to change that pattern. They are writing an op-ed article on the subject, and Mr. Canales appears in a podcast on the blog Tactical Philanthropy.

“My sense is that this has to do with foundations caring more about results than they have traditionally,” Mr. Brest said in a telephone interview.

Hewlett recently published an 81-page analysis of its Neighborhood Improvement Initiative, a program to reduce poverty in three neighborhoods in the Bay Area. The foundation spent more than $20 million over a decade but “did not fulfill its participants’ hopes and expectations for broad, deep and sustainable community change,” according to the report, which offers an unprecedented window into what happens when a major foundation investment goes awry.

Researchers hired to analyze the program found that Hewlett had many of the same problems that other foundations have had when they have given community residents responsibility for determining their needs and how to address them.

The effort lacked focus and moved much more slowly than anticipated. Hewlett ended up having to create new nonprofit groups to accomplish its goals, which diverted energy, money and attention from the goals of the program. Relations with three community foundations it had hired as managers were strained by differences in goals and cultures as well as the power dynamics typical of donor-charity relations.

“Foundations are supposed to take risks,” Mr. Brest said. “Sure, it’s better to tell your success stories, but there’s no harm in sharing our failures, too. The only thing at stake is our egos.”

From The New York Times on the Web (c) The New York Times Company. Reprinted with Permission.