Philanthropys New Clothes
Why honest feedback is sometimes as hard to find as the emperor's outfit.
When you were younger, did you have an aunt who sent a birthday present each year, but it was always the wrong thing, like Barbies when you were 14, or a world atlas when you were four, or a brightly colored sweater that was inappropriate at any age? Although the gift was not something you wanted, you were never comfortable being honest, because her intentions were good. After prodding from your mom, you would sit down to write an insincere thank-you note, telling her how much you loved the gift. To complicate matters, this aunt happened to be rich, so you hoped that perhaps one day she might get it right.
Yet, your aunt didn't ask you what you wanted or try to find that out from others. And you were too young, too polite or too cowed to give honest feedback, so the cycle of well-intentioned, but inappropriate, gifts continued.
A similar dynamic is often present in the relationship between grantmakers and the organizations they support. Foundations in this country support diverse programs, offer varying degrees of funding and follow myriad theories of change. They all believe that their work is truly helping the nonprofits and communities they support. Like your well-meaning aunt, though, foundations often fail to gather feedback to verify that their support is on target. Given the power differential, grantees rarely feel comfortable being candid.
Recent research, Attitudes and Practices Concerning Effective Philanthropy, reveals that:
This study, which was conducted by the Urban Institute, in partnership with Grantmakers for Effective Organizations (GEO) and funded by The David and Lucile Packard Foundation, represents the most comprehensive look at how foundations view their own effectiveness to date. The survey was distributed to every staffed foundation in the United States and had a 35 percent response rate, with 1,192 respondents. Although informed by GEO's leadership, the survey was an independent, confidential exploration of those issues.
The resulting data are rich and extensive, and we are only in the early phases of understanding all that they suggest. One finding adding to the complexity of any discussions is that a foundation's perceived effectiveness is highly dependent on the type, size and situation of that foundation. Similarly, these data will yield varied insights, depending on the reader's perspective. Leaders of nonprofit organizations and other keen observers of philanthropy shared their reactions to the data for this article. Additionally, foundations engaged in activities that address an issue raised in the study are included as examples.
In the story of Snow White, the queen asks the magic mirror a question, hoping to hear what she wants to hear, not to see herself more clearly. When it comes to soliciting feedback, the relationship between foundations and grantees can be similar to that of the queen and her magic mirror. Unless grantee feedback is anonymous, foundations are likely to hear all compliments and no criticisms. (See survey question, below.)
According to the study, most foundations don't regularly solicit any grantee feedbackwhether anonymous or open. Independent foundations were least likely to solicit grantee feedback, with only 12 percent soliciting anonymous feedback and 17 percent soliciting open feedback in the past two years. Community foundations were most likely to seek feedback, with 27 percent soliciting both types. Even so, philanthropy's self-perception is incredibly strong. Most foundations said their grantee relations were good or excellent. Among those who reported excellent relationships, only 29 percent had solicited grantee feedback.
The obvious benefit of grantmakers seeing themselves more clearly is the ability to innovateto make changes that will benefit their own development and enhance their ability to be helpful partners to their grantees. Transparency and accountability can only lead to more informed and, therefore, more relevant grantmaking.
Similarly, many grantmakers do not engage in rigorous evaluation, although more foundations evaluate their work than solicit grantee feedback. Overall, 57 percent of foundations answered "No" when asked, "Does the foundation ever formally evaluate the work that it funds?" Yet, grant quality is self-reported as good or excellent by 96 percent of foundations. (Note: The report's author, Francie Ostrower, does caution that since these data are self-reported, respondents are inclined to choose answers that portray their institution in a positive light.)
Signs of Progress
Some signs point to progress on this frontmore than 75 foundations have participated in comparative grantee perception surveys conducted by The Center for Effective Philanthropy over the past three years. A growing number of funders are soliciting feedback through other means, as well. Last year, after engaging in this process, The William and Flora Hewlett Foundation made a bold move, publicly distributing portions of its grantee perception survey results on the foundation's website (www.hewlett.org). Making the results broadly available builds in accountability and transparency and shows its commitment to carefully considering grantees' constructive feedback. According to Susan Bell, the foundation's vice president, "This seemed like such an obvious and appropriate thing for us to do that we were quite surprised by the level of interest that it generated."
Several other foundations have followed Hewlett's lead by publicly disclosing their results. In an attempt to incorporate grantee opinions in its work, REDF (formerly known as The Roberts Enterprise Development Fund), a San Francisco-based venture fund, has included feedback from grantee organizations in its staff performance appraisals. Grantees are given an opportunity to provide feedback about REDF staff members as part of a 360-degree performance appraisal. According to Kristen Ace Burns, REDF's president, "Because some members of our staff work so closely with the organizations we fund, grantees can often provide important insights into an individual's effectiveness that no one else would be able to offer. With this feedback, we can better tailor our effortsnot only as an organization, but also as individual staff membersto provide support in ways that are valuable to and compatible with our grantees."
In another approach, the Sobrato Foundation assesses its organizational performance in part by how efficient and cost-effective the grantmaking process is for grantees, as well as for the foundation's small staff. When the foundation shifted its grantmaking to exclusively provide operating support, the organization significantly changed its reporting requirements. In an attempt to save granteesand its own staffconsiderable time and effort, the foundation only asks grantees to complete and maintain their organization's profile on the Guidestar website (www.guidestar.org).
In addition to providing access to the organization's Internal Revenue Service 990 forms, the Guidestar profile includes basic financial information, plus a summary of the organization's programs, goals and accomplishments. Because Sobrato's due diligence focuses on the organization as a whole, instead of on a specific project, Guidestar's data have proved as thorough asand much more user-friendly thanmany grantmakers' reporting requirements.
At the local level, a number of funding communities are working together to create common application and reporting requirements for grantees. For example, the United Way of King County has formed a partnership with the City of Seattle to create a common reporting form. In upstate New York, a similar effort was led by the Rochester Grantmakers Forum. In 1999, 35 local grantmakers agreed to accept both a common application and common reporting format, which are made available electronically to grantseekers.
Those examples represent straightforward ways foundations are soliciting feedback to drive their decisionmaking and behavior. Once funders better understand the perspectives and needs of grantees, they can make changes that can improve both their performance and that of their grantees.
The Emperor's New Clothes
Like the courtiers in the old story of the emperor with no clothes, those with legitimate complaints or suggestions about philanthropy may be reluctant to criticize. "People in power positionswhether a boss, a teacher or a parentare often insulated and don't get authentic information about what they do or how they are perceived," comments Jan Masaoka, executive director of CompassPoint Nonprofit Services, the largest nonprofit management support organization in the country. "What makes it especially egregious in philanthropy is the earnest hypocrisy with which it is done." The resultwhether intentional or notis that some grantmakers have become isolated and removed from the communities they support.
This insularity was well illustrated at a recent gathering hosted by an association of grantmakers. While discussing the practice of soliciting grantee feedback to improve a foundation's own practices, one attendeethe sole staff person for a small family foundationcommented emphatically, "Why would I want to know what grantees think about us? It's not like we'll ever run out of organizations that want our money." Arguably, those could simply be the sentiments of one curmudgeonly individual. However, the comments hint at a broad lack of understanding about the value of assessing the foundation's own performance through the lens of grantees.
"Foundations should not confuse the smile and consent of a grantee with full agreement and a solid relationship," advises Irv Katz, president of the National Human Services Assembly. "I've been a grantee as well as a grantmaker, and the former can, or actually should, make you humble as you function as the latter. Foundations have a special responsibility to recognize and support the value, expertise and real-world experience that grantees bring to the table. I suspect that many foundations do, in fact, have very positive relationships with their grantees. However, I also suspect that few recognize the valuereally, the necessityof probing beneath the surface to find out what this key constituency truly needs and experiences in the relationship."
Philanthropy's insularity also came across loud and clear in the Urban Institute study. For instance, those in philanthropy that are evaluating their work overwhelmingly report that the primary audience for those results is the foundation's own board and staff. Although this is an important audience, it seems short-sighted to share evaluation results only with this tight-knit group. Admittedly, confidentiality is a concern, but researchers, other grantmakers and nonprofits in a similar field could benefit greatly from many of the evaluations funders conduct. Yet, the majority of foundations do not make the results of their evaluations public (65 percent rarely or never make evaluation results public). Notably, a higher percentage of community foundations than corporate or independent foundations often or always make the results public.
Some foundations that are particularly committed to evaluation have long understood the external value of those evaluations. In fact, The Wallace Foundation decided nearly a decade ago to make the results of every evaluation it conducts available to the public. Evaluation is not viewed as a scorecard or a way of grading grantees, but as serving a much broader purpose. The foundation structures evaluations not only to inform its own work and that of its grantees, but also to provide benefits to leading organizations and policymakers. Although those individuals might never receive a grant from the foundation, their actions will determine the future of those fields.
Many management theorists argue that the most successful people in positions of power are those who welcome divergent opinions and critics. Although most foundations aren't soliciting outside advice from grantees, policymakers and opinion leaders, community foundations are much more likely to seek external feedback. Community input is seen as very important to formulating grantmaking priorities by far more community foundations (51 percent) than corporate (27 percent) or independent ones (13 percent). A corollary finding is that twice as many community foundations (41 percent) had conducted a needs assessment of its field or community than corporate or independent foundations had.
A recent study, conducted by Wirthlin Worldwide on behalf of the Council on Foundations, revealed that public awareness of foundations is devastatingly low. When asked to name a foundation, only 11 percent of the general public could correctly identify even one. Only 20 percent of those interviewed agreed that foundations use their financial resources effectively to maintain or aid educational, social or charitable activities. Public perception is critical to most nonprofits that rely on media coverage and positive word of mouth to maintain a strong base of donors and volunteers. Funders are apparently missing the mark in explaining to the public who they are and why they do what they do.
Although those in the foundation world are aware of the media's role in shaping public discourse and understand how media coverage affects grantees' ability to do their work, survey results suggest that most foundations fail to act on that understanding. Many grantmakers are unintentional in how they use communications as a tool to create social change. In short, funders must become much more sophisticated in their approach to communications.
Results of the Urban Institute study amplify this call to action. Consider this:
When asked about the foundation's overall effectiveness, 43 percent of foundations in the survey rate themselves as doing a fair or poor job on communications and public relations. This is the single lowest area of self-appraisal. However, community foundations are far more likely to be proactive when it comes to communications, specifically:
Given the organizational necessity of soliciting public support, community foundations have an incentive to communicate proactively that other types of foundations often lack.
Do as I Say, Not as I Do
Grantmakers often expect their grantees to exhibit behaviors that they themselves do not model. Grantmakers have behavioral expectations of the organizations they fund, and much of the due diligence process is intended to uncover whether those expectations are being met. Is the management sound? Does the organization track and use funds appropriately?
One notable finding of the Urban Institute study is that "a substantial number of foundations are not engaging in practices that by their own standards are important to effectiveness." This difference between belief and practice shows a fundamental disconnect. Grantees may be leery of recommendations about effectiveness practices that the foundation itself does not engage in.
The Urban Institute study revealed several stark examples of practices that foundations expect grantees to undertake, even though nearly half of the staffed foundations in the United States who responded to the survey fail to do so. Fully 48 percent of foundations reported that they have not conducted formal reviews of staff performance in the past two years. Among those respondents who say that conducting formal evaluations of funded work is very important to being effective, 33 percent do not conduct such evaluations.
Although outside the scope of this survey's results, another example of a practice foundations engage in that would not be tolerated in grantees is leasing or purchasing plush office space. Most funders would be suspicious of a grantee that acquired top-notch office space in the most desirable neighborhood in town.
Mike Bangser, president of the Hartford Foundation for Public Giving in Connecticut, recognizes this potential inconsistency and, therefore, makes modest offices part of his credo. He says that this is one way to mitigate the power imbalance inherent in the grantor-grantee relationship. When grantees visit the foundation's offices, they are more comfortable because the space is intentionally modest, lacking the trappings of some other foundation offices. The foundation's staff also believes that meetings with grantees should regularly be held on the grantee's home turf.
Paradoxically, the survey results indicate that believing in strengthening one's own infrastructure does not necessarily translate into a willingness to provide grantees with funds or technical assistance to support their infrastructure. However, recognizing the importance of a grantee's organizational performance correlates with that being held as a higher value at the foundation. The survey indicated that foundations that provide management assistance are more likely to rate comparatively high on all of the components or approaches to effectiveness (see Effectiveness Frameworks, below).
These inconsistencies beg the question of why foundations don't necessarily apply these standards to themselves. This is a tricky question because the reasons are probably as varied as philanthropic organizations themselves, but a few possibilities include:
Lack of incentives. Most foundations (with the notable exception of community foundations) don't have pressing incentives to engage in activities like the ones explored in the Urban Institute research. They are responsible primarily (almost exclusively) to their boards of directors. Without external drivers, such as regulation or living donors, those activities may take on a lower priority. "The challenge to foundations that want to excel is how to go beyond the grantmaker-grantee relationship to forge true partnerships with grantees where both parties have input and both are accountable in a significant measure for the results," posits Irv Katz.
Because foundations aren't subject to the intense and externally imposed accountabilities that most grantee organizations face, Katz suggests that the standard of practice for funders should be:
Role of the donor. The individual donor's motivation for giving probably also plays a role. Jan Masaoka suggests that, "Although it is well within their physical and intellectual capacity to do a better job in building strong organizations, it's not a choice that some funders make."
Why don't they do a better job? "Well," Masaoka continues, "for some, philanthropy is a sideline." In other words, because the philanthropic impulse derives from individual motivations, it may not always seem well suited to rigorous evaluation.
Foundation size and stage of lifecycle. Foundations in the United States are typically pretty small operationsa large percentage of which have been created in the last decade. Therefore, they face a lot of the same infrastructure issues as any startup. They may not be sophisticated enough to employ the range of effectiveness practices considered in the survey. It's a conundrum, given their role.
Barbara Kibbe, vice president for program and effectiveness at the Skoll Foundation, suggests that "since we're hearing from many foundations early in their development, the news is not so bad, if you consider what they value in terms of effectiveness practices as aspirational. It's up to more established grantmakers and groups like Grantmakers for Effective Organizations to deliver them affordable tools to help them institute the practices that will enable them to continuously improve as they evolve as organizations."
What funders can do, how grantees can help
Each foundation must improve its own performance if philanthropy is to be credible and effectivevital qualities with the nonprofit sector under increasing scrutiny from both the media and government entities. Many examples of best practices funders can use to improve their credibility and performance are already under way, including more regularly soliciting grantee and community input, reconsidering the impact of foundation practices on grantees and becoming more intentional about communicating with key constituencies. Those funders interested in testing whether there is a gap between what they value and what they practice can use the survey as a diagnostic tool.
Kibbe suggests that in addition to critics, we need helperspeople and organizations that are willing to help funders make the appropriate improvements to their practice. Regional associations of grantmakers, affinity groups and other funder networks are already doing this, but there are still unmet needs.
Katz proposes that a task force be convened to develop strategies to address the inconsistencies identified in the study. He noted that this task force would benefit from the presence of key groups outside philanthropy, including charity regulators, public officials and nonprofit leaders.
Although grantee organizations can help funders think through how to improve their practices, that role depends a great deal on the strength of their relationship. Those engaged in the work of philanthropy have the power to change how we perform individually, as well as how our performance is viewed collectively. This is a challenge that cannot be met without the serious engagement of grantees and other constituents. Now is the time to start.
As part of this study, we developed a typology of effectiveness frameworks among foundations. Applying this framework permits us to go beyond a discussion of individual attitudes and behaviors to analyze foundations in terms of their overall approaches to effectiveness. The typology groups foundations according to how they rank across four scales that measure different effectiveness components and approaches. The four scales are:
Proactive Orientation: This scale measures whether foundations view proactivity as important to achieving effectiveness. Foundations that measure high on this scale make grants for foundation-designed initiatives; use the presence of measurable outcomes as an important grantmaking criterion; and believe that it is important to actively seek out social needs to address and to focus on root causes of major problems.
Technical Assistance/Capacity Building: This scale measures foundation support for management and capacity development among grantees. Foundations that rank high on this scale make grants for organizational and management development and provide nonfinancial technical assistance in areas that include board development, strategy and planning, fundraising, communications, technology and grantee meetings.
Social Policy/Advocacy: Foundations that rank high on this scale believe that influencing social policy is important to being effective. They make grants supporting advocacy, and a major goal of their grantmaking is to "strengthen social change and strategies for social change."
Internal Staff Development: This scale measures foundation support for the development and training of its own staff. Foundations that rank high on this scale more often provide opportunities for training and development in technology, internal management and grantmaking. Although we hypothesized that the items in this scale and the technical assistance scale might have correlated and formed one "capacity building (internal or external)" scale, this was not the case, indicating that support for internal capacity building and support for capacity building among grantees are two distinct sets of activities and priorities.
Using a statistical technique called cluster analysis, we then identified four discrete clusters, or groups of foundations, according to how they ranked on all four of these scales. The four groups are:
High on All: These foundations rated comparatively high on all four of the scales. This group was the only one with relatively high scores on the technical assistance or capacity building scale. Thus, we find higher levels of support for technical assistance only among the group whose members also are proactive and oriented toward social policy and emphasize internal staff development. There were 313 foundations in this group.
Proactive/Policy: These foundations rank relatively high on the proactivity and social policy scales, but not on the technical assistance or capacity building or internal staff development scales. There were 296 foundations in this group.
Proactive/Staff: Foundations in this cluster rank high on the proactivity and internal staff development scales, but not on the social policy or technical assistance or capacity building scales. There were 230 foundations in this group.
Low on All: These foundations ranked low on all four of the scales. There were 224 foundations in this group.
The survey question read, "During the past two years, did the foundation engage in the following activities to help evaluate or strengthen its own performance?
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Kathleen P. Enright is the executive director of Grantmakers for Effective Organizations in Washington, DC, a community of more than 600 funders working to maximize philanthropy's impact by advancing the effectiveness of grantmakers and their grantees. She can be reached at firstname.lastname@example.org.