Charities Surprise Donor Foundations With Bluntness

By Stephanie Strom

The world of charities, the world of soliciting and spending other people's money, is governed by a principle so obvious that it has inspired at least three cliches: Beggars can't be choosers. Silence is golden. Don't bite the hand that feeds you.

This is why the mighty William and Flora Hewlett Foundation sent a shock through the nonprofit sector in February when it posted a survey on charities' attitudes about its work at www.hewlett.org/AboutUs/granteeperceptionrelease.htm.

The foundation, steward of $6 billion and a standard-bearer for the new breed of philanthropies born of the technology boom, was flaunting its warts and, even more shocking, urging its peers to follow suit.

"The foundation has long been concerned about improving philanthropy and the nonprofit sector in general," the president of the Hewlett, Paul Brest, said. "The more information we can make available, the better we all are."

That sentiment is rarely put into practice in the nonprofit world. Nonprofit organizations, which typically live hand to mouth, are understandably wary of alienating any source of financial support. But as the Hewlett survey shows, this code of silence is increasingly being challenged. As state and federal officials and the public demand greater transparency from charities and foundations, more foundations and donors are seeing the benefits of bluntness.

"There's no feedback loop," said Lorna Lathram, a consultant who helped Pierre M. Omidyar, a founder of eBay, start his foundation. "In the for-profit world, you make a new cookie, put it on the shelf in a grocery store and get immediate feedback. But we don't have that kind of mechanism in the nonprofit sector."

Silence costs charities deeply in some cases. Some experts predict that the repeal of the estate tax will cost the nonprofit sector $10 billion in lost revenue, but few individual charities spoke out against it, preferring to let their trade groups complain.

"There were many nonprofits that believed the data that said the withdrawal of the estate tax would be about one of the most detrimental things to the sector that the government could do," said Diana Aviv, president of the Independent Sector, a trade group for charities and foundations. "But they hid behind our skirts because they had donors who were wildly in favor of getting rid of the estate tax for personal reasons, and they were afraid of taking a stand and losing them. Nonprofits have a responsibility to speak up."

Mr. Brest shares that concern, which was a reason for the Hewlett survey. It showed that Hewlett's charity partners deemed it deficient in communicating its goals, in its impact on the community and in its application requirements.

"It's a mixture," Mr. Brest said. "There's some stuff we're quite proud of like it's nice that people think this foundation is leader in its field, and there is some stuff we need to work on."

Hewlett was one of 30 foundations whose grant recipients were surveyed last spring by the Center for Effective Philanthropy, a research and advisory firm founded by Mark R. Kramer, a venture capitalist and philanthropist, and Michael E. Porter, a professor at the Harvard Business School. The center decided to survey independently charities that received money from several large foundations to see whether that would produce the feedback that the foundation heads sought. The center alerted the foundations but did not seek their permission, its executive director, Phil Buchanan, said.

For its first survey, the center invited 200 foundations to pay up to $30,000 to learn what their charity partners thought of them and how they compared with their peers. Thirteen foundations took the offer. Eleven participated in a second round of surveys, and 17 signed up for a round that began last month.

To make the surveys meaningful, several foundations that did not pay were also examined.

The foundations that are willing to talk are moving fast to address the problems identified by the survey. The Rhode Island Foundation, for example, found that groups that had received grants from it in the past resented the length of time they spent applying for new grants, so it is shaving 14 hours off that process.

"We found that in our zeal to be accountable we were putting people we already knew pretty well through some pretty significant hoops," said Ronald V. Gallo, president and chief executive of the foundation.

Foundation executives say one of a beneficial aspect was the survey's ability to show how they compared with peers, something they are unable to learn with their own studies.

The Greater Cincinnati Foundation had surveyed its own recipients but was disappointed in the results.

"Even though we provided a means for them to talk anonymously, we didn't learn anything, in part because we had nothing to compare the results against," Kathryn Merchant, its foundation's president and chief executive, said.

The foundation was taken aback to learn that it was the slowest to approve grants of all foundations whose beneficiaries were surveyed by the Center for Effective Philanthropy. So it streamlined reviews of organizations that were seeking grants of $10,000 or less.

"It's not all that scary to get feedback," Ms. Merchant said. "I knew we were going to get slammed on the time thing, but getting information that compared us to others really helped us change practices that had been around a long time."

Nonprofit leaders applaud such moves, and Hewlett's decision to highlight problems in their relationship with foundations, but many remain skeptical and silent.

"I've made the mistake of believing foundations when they asked me to push back, and I've paid the price for that," said the executive director of an organization who would not let her name be published.

She and others said they were frustrated with the Omidyar Foundation, which was founded by Mr. Omidyar and his wife, Pam, in 1998. Her agency and 29 others had been working with the foundation for almost two years, adding staff, buying software and rewriting business plans to meet its requests and requirements.

The groups say they agreed to the changes, some of which added to their costs, because Omidyar had promised them that it would stand by them for the long haul.

"There were these heart-stopping moments, but every time I went to them scared that I was getting into something I couldn't support, they would say, `Don't worry, don't worry, we'll be with you for 10 years,' " said another nonprofit leader who also insisted on anonymity.

But in November, Iqbal Paroo, president of the foundation, told the partners that strategy would change and that they could rely on it only through this year. Mr. Paroo said the foundation had paid for many of the changes that it imposed, hiring consultants and installing systems to meet the foundation's needs for reporting and accountability.

"We developed a very open relationship with them, in which they would be talking to us about some of the challenges they were working with, and we were working to understand their issues," Mr. Paroo said.

He said that all the groups that Omidyar has supported might continue to receive its support when its strategic planning was complete and that nonprofit leaders who have grumbled conceded that is why they have not voiced their complaints to the foundation.

They will have an opportunity to vent anonymously soon, however, because the foundation is participating in the latest round of surveys by the Center for Effective Philanthropy. They began last month.

"This historical relationship, power dynamic, arrogance, whatever you want to call it between foundations and nonprofits is unhealthy," Mr. Paroo said. "Like the Hewlett Foundation and others, we are working hard to level the playing field."