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Beyond Infrastructure

May 12, 2010

(Bradford Smith is president of the Foundation Center. In his last post, he wrote about philanthropy's digital divide.)

Npq_mosaic Entering a slow and uncertain recovery after a brutal recession, we find ourselves once again in a period where America's foundations are struggling with how to continue to pay for the
so-called "philanthropic infrastructure." I have no idea when the term "infrastructure" began to be used to describe the myriad membership, data, research, training, and networking organizations that exist today. I always associated infrastructure with roads and bridges, but Wikipedia gives a broader definition: "infrastructure provides organizing structure and support for the system or organization it serves, whether it is a city, a nation, a corporation, or a collection of people with common interests. Examples: IT infrastructure, research infrastructure, terrorist infrastructure, tourism infrastructure."

So technically I guess we might be able to speak of the "philanthropic infrastructure," though I wonder whether we are doing ourselves a disservice by lumping so many different organizations and services into one basket. Here's why.

(Illustration credit: The Nonprofit Quarterly)

Philanthropy is an archipelago

Indonesia, the largest archipelago in the world, has 17,000 islands; American philanthropy has 97,000 grantmaking foundations and public charities. The vast majority are independent foundations -- endowed "island" institutions with their own forms of evolution, language, and ways of doing things. Many of these foundations were formed by fierce-minded donors bent on being as successful in philanthropy as they had been in business and determined to be different than the rest. The famous phrase "Once you've seen one foundation, you've seen one foundation" is a bit of an exaggeration, but not by much. With no exposure to consumer markets or campaign pressures, foundations are free to experiment as they wish -- that is their true comparative advantage -- but few face external pressures to prioritize, strategize, and collaborate. Building and maintaining "infrastructure" is challenging and costly; it takes a lot of bridges, ferry boats, airports, and undersea cable to link the islands in an archipelago.

Philanthropy keeps growing and changing

In 1980 there were 22,088 active private and community foundations. By 2008 that number had grown to 75,595. Foundation assets reached a peak of $682 billion in 2007 before falling to $565 billion in the recession of 2008. Philanthropy's obituary has been written recession after recession, but wealth accumulation keeps roaring back and each year more new foundations are created than go out of business. And as philanthropy grows, so does the support network of councils, associations, centers, groups, advisors, initiatives, and other organizational forms so brilliantly mapped in 2008 by the Nonprofit Quarterly.

Moreover, philanthropy has changed significantly since 1911 when Andrew Carnegie set up the Carnegie Corporation. Fueled by new donors who became wealthy relatively early in life, the business of grantmaking has expanded to include concepts like "venture philanthropy," "social investing," and "social innovation." These new donors bring with them a desire for outcomes, results, and the metrics required to prove impact and effectiveness. The Heron Foundation's mission-related investing, Omidyar Network's "flexible capital," and the potential of citizen philanthropy through platforms like Global Giving are taking philanthropy beyond foundation grantmaking. But the need for philanthropy to be professionally represented before federal, state, and local government remains unchanged as does the need, even in the digital age, for the decidedly retro activities of meeting and networking in person. And new needs and services have arisen, including social impact assessment; collecting, cleaning, and visualizing ever growing volumes of data; Web design; training; and using social media. It is safe to say that in the next ten years needs will arise for services that we can’t even imagine today.

Making false distinctions

The history of philanthropy is filled with people extolling the virtues of spending money to help others instead of oneself. Most foundations tend to articulate their missions in terms of directly benefiting underserved populations. They have mixed feelings about covering overhead costs. Some will admit that to truly improve the lives of the underserved they may have to fund research or even policy advocacy. But "infrastructure" can be a hard sell since it is even more difficult to explain how it helps those in need.

Struggling to make such distinctions is not new. The 18th century economist/philosopher Adam Smith wrote: "There is one sort of labour which adds to the value of the subject upon which it is bestowed; there is another which has no such effect. The former, as it produces a value, may be called productive; the latter, unproductive labour." But even Smith could not draw the line that sharply and added, "...the labour of the latter, however, has its value, and deserves its reward as well."

Though it is often considered less essential than the "real" work of helping people, the "infrastructure" has its value. You can't be a philanthropist without philanthropy.

Getting beyond infrastructure

Banning the phrase "philanthropic infrastructure" from our vocabulary will not solve the challenge poised in the first sentence of this post -- how to support it -- but it might free our thinking. A colleague of mine rightly points out that no other field or sector would lump such diverse organizations together and call them all "infrastructure." Terminology matters and how one describes and frames a problem can often make the difference been solving it and chasing one's tail.

In large part the market will sort things out. Organizations that in one way or another support the $43 billion industry that is philanthropy in this country are painfully aware of the relationship between their relevance, the demand for their services, and their survival. They have four basic sources of revenue -- membership dues, conference fees, foundation grants, and earned income. Pursuing any one of these pulls an organization in different directions and, like an investment portfolio, diversifying across these various revenue streams is the best guarantee of long-term institutional stability. My guess is that earned income probably has the most potential, though the increased demand from new audiences as philanthropy grows and changes will increasingly be at odds with the push for everything online to be "open and free."

Foundation giving will continue to play a crucial role, but getting foundation grants, from the perspective of those that seek them, is also a kind of market-based activity. We know that foundations will always be willing to pay for what they feel they truly need. Some of the so-called infrastructure organizations were created by foundations themselves in order to meet new demands. But at least a portion of their spending seems to be moving toward projects that specifically benefit the work of single foundations or of funder collaboratives and their grantees. This has been accompanied by the rise of prestigious consulting groups not usually thought of as part of the "infrastructure" that have become major players in philanthropy. Bridgespan alone received some $50 million in foundation grants between 2003 and 2008, with smaller amounts going to groups such as Monitor, McKinsey, TPI, and the Foundation Strategy Group. Whether this trend is additive or will serve to crowd out general support, memberships, and fees remains to be seen.

I have lived this debate from all sides. For many years I worked in a foundation that felt a strong obligation to build and strengthen the field of philanthropy in the U.S. and around the world. I have also known living donors with little interest in "infrastructure" who saw it largely as a waste of their money and staff time. More recently I crossed over to the other side to head up the Foundation Center and have seen firsthand the hard work and dedication of the professionals who try to make philanthropy and the nonprofit sector work smarter and better.

The way forward for all our organizations is through collaboration, competition, and "coopetition." We will need to get much better at not doing what is already being done by someone else and foundations will have to be more careful about encouraging (and supporting) unnecessary duplication. Along the way there will be mergers, acquisitions, alliances, and maybe even a few dogfights. I don't know whether there are too many of us, too few, or whether we are all always doing what is most needed, but I am convinced that philanthropy will never get close to realizing its potential without us. So let's get beyond yesterday's infrastructure debate and embrace tomorrow's challenge of making the world a more just, environmentally sustainable, hopeful, and beautiful place. There's plenty of room for us all in that endeavor and none of us alone have the answers.

-- Brad Smith

Comments

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Brad, thank you for sharing your expertise on changing trends in philanthropy and foundations. I was especially interested to read about changes in donors' expectations. You mention an increased emphasis on outcomes and I agree that this seems to be a rising trend, especially among younger donors. People want to see the results of their gifts.

What I've also seen, and it's related, is an emphasis on quality. UniversalGiving™ is a web-based marketplace that helps people give and volunteer with the top-performing, vetted organizations all over the world. All projects are vetted through UniversalGiving's trademarked, proprietary Quality Model.™ That resonates with people, because they want to know they're giving to the best organization. They want to know their gift is going to the best place, so that it can have--as you discuss--the most impact. In many ways I think this is an encouraging trend. There's so much work to be done. While there's a danger in becoming too lost in metrics of results, I think it's also exciting to focus on making each effort count as much as possible.

Sincerely,
Cheryl Mahoney
cmahoney@universalgiving.org
http://www.universalgiving.org

Cheryl,

Congratulations on the work of Universal Giving. The kind of quality vetting you are doing is somewhat similar to something I came across when I worked in Switzerland; where someone from the International Standards Organization was doing this for a number of small foundations that didn't feel they could afford lots of staff. As you well know, assessing quality and comparing diverse social sector organizations is tricky business. Many donors feel a real need to know that they are supporting the best organizations and look for help in making that judgement.

On a different, but related note, the Foundation Center has experimented with assessing the online transparency of foundations themselves through a platform entitled: www.glasspockets.org

Thanks for thaking the time to comment.

brad

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