Analysis

Editor's note: The January/February 2006 issue of Foundation News & Commentary included a review of the book, A Gift of Freedom: How the John M. Olin Foundation Changed America. The review drew upon a published organizational analysis of the John M. Olin Foundation written by Debra England, whose work should have been acknowledged as a source. Ms. England's analysis, "Muscular Philanthropy: Tough Love & the John M. Olin Foundation," was originally published on www.townhall.com on November 15, 2005. We are printing an edited version of the article as a service to our readers.

Pound for pound, the largest left-leaning foundations outspent the top conservative foundations last year by more than ten to one in a market where grants worth $32 billion were made by foundations managing combined assets of more than $475 billion. The Ford Foundation, for example, sits atop roughly $11 billion worth of assets, while the conservative John M. Olin Foundation—which just spent down its portfolio and closed its doors—never reached so much as $120 million worth of assets under management in a given year. And yet, John J. Miller recently published a book entitled A Gift of Freedom: How the John M. Olin Foundation Changed America. How indeed?

Revered as a leading architect of the conservative philanthropy movement over the past 25 years, the Olin foundation leaves behind a network of conservative grantee institutions, organizations, scholars and opinion-shapers that have been on the frontlines of what Olin staffers described as a fiercely competitive "battle for men's minds."

Conservatives across the country are now asking themselves: Whither the conservative movement in philanthropy? We can learn by careful study the synergistic and distinctive organizational competencies that allowed the Olin Foundation to achieve such impact with comparatively moderate financial resources. It was not by accident, and it can be replicated by conservative philanthropists committed to unleashing the entrepreneurial creativity of like-minded visionaries.

1. Strategic Vision: McKinsey research on high-performing nonprofits has established that the nonprofit organizations that make the greatest gains in social impact are those that tackle high-level questions of mission, vision and goals, which drive strategy in highly disciplined and focused organizations. Within the first few years of operation, John Olin clarified and focused a highly targeted mission that drove the work of the foundation. The result was not a straitjacket, but, as Jack Welch put it, "the evolution of a central idea through continually changing circumstances."

2. Vigorous Leadership: Absent the market discipline imposed on forprofit organizations functioning in competitive environments, nonprofits must look to exceptional, values-based leadership to drive a performance orientation and a culture of excellence consistently throughout the organization. John M. Olin and his hand-picked successor, William Simon, understood this. Both men were passionate, competitive, risktaking, entrepreneurial problem-solvers who carried the same qualities that made them successful in business into their philanthropic work.

3. Talent Acquisition and Retention: From the appointment of his corporate attorney as the foundation's first executive director, John Olin and his successors did not allow philanthropic norms to determine hiring. Olin and his successor, Bill Simon, believed in hiring the best, not the common or the expected. The "norm," after all, has frequently been for wealthy entrepreneurial capitalists to endow a foundation and leave it in the hands of people who gradually shift over time toward activities that undermine the very values for which the original donor stood.

4. Values Alignment: Crucial to optimizing effectiveness, this is the most common point on which conservative donors go right off the rails. The Olin foundation board and staff were in full values alignment. There is a famous 40-year-old Academy of Management Journal article by Steven Kerr called "The Folly of Rewarding A, While Hoping for B," which is still taught to MBAs today. Too many conservative philanthropists still do not understand the power—by commission or omission—wielded by foundation staff who have their own agendas. John Olin and Bill Simon understood this.

5. Rigorous Intellectual Honesty: Closely tied to values alignment, this is sadly lacking in too many philanthropic organizations. A tough-minded willingness to confront the brutal facts, more common in the competitive world of business, is a requisite antidote to the lethal "culture of nice" which dominates so much of the nonprofit world. At McKinsey, consultants are schooled in "the obligation to dissent," because only such a culture can produce the incisive analytics and superior problem-solving for which clients hire consultants. The same principles apply in the philanthropic realm, though they are much less frequently executed; only a demand for truthful analysis and respectful opportunities to debate ideas can produce excellence. The "culture of nice" guarantees a culture of mediocrity.

6. Investment Mentality, Entrepreneurialism and Performance Orientation: In a departure from what Miller refers to as the typical rich man's charity, John Olin instilled an investment mentality in his foundation from early on. Today, venture philanthropists attempt to bring a similar mindset to their funding approach. But it is not necessary to be structured like a venture philanthropy in order to utilize a yieldoriented entrepreneurial approach to one's philanthropy. In the case of John Olin and Bill Simon, both calculated risk-takers, this mindset offered strategic flexibility while optimizing long-term return on investment.

7. Moral Courage: Principled conservative philanthropy will be controversial. Those conservatives who lack moral courage may contribute ad hoc funds to a range of conservative nonprofits, but they will not evince the fortitude or the passion necessary to pursue a high-impact strategic course. John Olin surrounded himself in his philanthropic work only with people who shared his passionate vision, his conservative principles and his competitive drive to execute them.

The Olin foundation offers a case study in how, by effectively leveraging dramatically fewer financial resources, conservative philanthropists nonetheless managed to reshape the public policy landscape over the past quarter century—and how they may continue to do so in the future.