February 19, 2015
In today's world, it is almost obligatory for any self-respecting foundation to describe its work as "strategic." At the same time, a growing number of foundations are coming to the realization that, if they hope to scale their work and achieve lasting impact, they need to collaborate with each other and across sectors. I fear, however, that the way many foundations approach strategy is erecting barriers rather than building bridges to collaboration. This post is my attempt to explain why that is and to offer some practical solutions to the problem.
My thoughts on this matter were sparked by remarks originally made by Larry Kramer, president of the Hewlett Foundation, and elaborated on by Heather Grady in the Stanford Social Innovation Review. For the record, I believe that foundation strategy is a critical element in achieving impact, but like so many things it is best practiced in moderation.
The fetishism of strategy
It used to be that people made a point of saying they practiced philanthropy rather than charity. That distinction gradually fell by the wayside as younger generations of philanthropists began to introduce ideas and practices from the business world related to impact and metrics, liberally peppering their discourse with phrases like "social return on investment." In their eyes, the way many practiced philanthropy was not much of an improvement over charity, which they saw as dealing largely with symptoms and driven by donors and staff who valued heart over head and had no clear way to articulate hoped-for outcomes — let alone measure them. The more the term philanthropy became devalued, the more it came to be modified by adjectives of choice. Suddenly, if your philanthropy wasn't tactical, effective, catalytic, high-impact, or, at a minimum, strategic, it wouldn't be taken seriously.
Many foundations, particularly the larger staffed ones, responded to this change by immersing themselves in protracted strategic review processes, frequently under the guidance of prestigious consulting firms. Often triggered by a change in foundation leadership, these exercises tend to follow a pattern, one aspect of which is well-known to nonprofits frustrated by the all-too-familiar refrain of program officers who cite "our deep internal review process" as the reason that "no new requests for funding can be entertained at this time" and who encourage you to get back in touch "when our new priorities have been defined."
As frustrating as this kind of strategic lock-down can be to those on the outside, the process viewed from within foundations is far more challenging than it may seem. Strategy reviews usually are precipitated by a donor or new leader who wants to shake things up, and the process often starts with a question: How can we make a difference? Or, how can we use our resources to do something others are not? That, in turn, typically triggers some kind of scan to see how other resources are being utilized. The exercise often involves trying to identify big trends and future scenarios, which can be daunting and seem impossibly large and intractable when compared to the resources available to even the largest foundations.
The less high-minded aspect of the foundation strategy process is the inevitable internal editing that occurs. Foundations rarely operate with a blank slate; instead, they have a legacy of existing program priorities and grantee relationships that somehow must be reconciled with whatever new strategic priorities emerge from the process. Yet the most difficult and time-consuming aspect of all this is the internal consensus building: when it comes to unveiling a new strategy, foundations have to get everyone on board — from grants administrators, to program officers, to directors and trustees — and that takes time, finesse, and compromise.
At the end of the process, foundations emerge from their state of chrysalis with a series of announcements about new strategic directions, programmatic priorities, and initiatives. Grantseekers, previously put on hold and frustrated, now are faced with more practical challenges like figuring out where the work of their organizations fits within the new strategic framework and who their program officer might be. Some foundations do a superb job of providing their grantee partners with a roadmap, while others leave them to figure it out on their own.
Raising the transaction costs of collaboration
The difficulties of collaboration, particularly its time-consuming nature and the challenges of collective action when several foundations try to implement something together, are well known. I am worried, however, that the strategy review process described above may be driving those transaction costs of collaboration even higher.
There are two reasons for my concern. First, foundations, as endowed, tax-advantaged institutions, are blissfully free from the daily pressures that drive short-term behavior in other sectors: they don't need to raise money, they don't need to sell products in a competitive marketplace, and they don't need to chase votes. They are expected to contribute to the public good in exchange for their favorable tax status, and ideally that requires being out on the street, understanding how people live and institutions work. Yet these protracted strategic review processes are intensely introspective affairs. The outside information and opinions that manage to penetrate the walls of the foundation more often than not are filtered by those who do the interviewing, write the studies, and describe the trends, sometimes complemented by a discussion or two with hand-picked experts. This highly controlled approach is partly a response to the fact that endowed foundations are like islands of money surrounded by people who desperately want some of it: they can't turn to their current and potential grantees for advice without getting endless variations on the "fund us" theme. Whatever the reasons, I would argue that it is not healthy for already insulated institutions to close themselves off even more from the outside world for any length of time.
The second reason that this fixation on strategy impedes collaboration is because of the internal consensus building process I referred to above. After a staffed foundation has gone through months (in some cases, as much as a year) of introspection and internal consensus building, there is a tremendous degree of investment in the final product. With its carefully-crafted goals, program areas, initiatives, and cross-cutting themes, all crafted to be unique and cutting-edge, the strategy becomes practically non-negotiable. Thus, when two or more foundations try to find a way to collaborate and scale their efforts, the over-investment in their individual strategies makes it difficult to find common ground and reach compromise. More often than not, to make it work, somebody has to blink, be flexible, and give up a bit of sovereignty. Doing so can feel like abandoning one's own strategy or, at the very least, betraying one's focus — something no foundation wants to risk in an impact-driven world.
That this is not an ideal situation doesn't mean it can't be addressed. Based on my long experience working inside foundations and observing the entire field from my present-day vantage point as president of Foundation Center, here are a couple of ideas.
Solution #1 – Start strategy with a different question
Foundations have no obligation to be unique, so rather than starting the strategy review process with the question, How can we be different?, they should ask themselves, How can we be more alike? That's right, foundations would be well served by finding a cause or geography that resonates with their mission, seeing what kinds of resources other foundations already are allocating, and then adding their own resources to the mix. Being a joiner rather than a loner has tremendous strategic impact when it comes to leveraging resources and scaling one's efforts. Discovering who is funding what and where and knowing more about what other foundations know should be the beginning of any strategy review process. And it's easier than you think because of the deep data and knowledge resources our field possesses today, as well as the technology available to explore them. Foundation Center has excellent tools like Foundation Maps and IssueLab for doing so.
Solution #2 – Ease up on the legacy thing
There may not be much we can do to change the inclination of living donors to leave a legacy; after all, it's their hard work, ambition, and good fortune that makes foundations possible in the first place. But why do foundation boards and presidents need to be so concerned about their own legacies? The kind of competitive drive that fuels egos and success in business and politics is not essential to philanthropy. Foundation leaders are free to be learners, joiners, enablers, facilitators, and collaborators. America's great foundations are remembered, and continue to be praised, not so much for their current strategic priority or latest initiative as for their patience and willingness to stick with ambitious causes — eradicating disease, combating racism, educating the poor and disadvantaged, nurturing documentary film — over long spans of time that, more often than not, transcend the tenure of a single president, program officer, or group of trustees. Easing up on the concern for one's legacy, or perhaps re-defining legacy to be about joining and collaborating with others, could help make the strategy review process in foundations a much simpler and faster process. It might also correct for the strategic over-steer that produces the zigs and zags that undermine the stability so valued by foundations' grantees and partners.
America has nearly 90,000 independent endowed foundations, the vast majority of which have little or no staff to worry about the things I've touched on above. In many, many cases, they support causes close to home and are immensely valuable to the nonprofits that undergird our civil society. But the thousand or so foundations that each have over $100 million in assets account for more than half of all foundation giving and rightfully care about strategy. They could be far more efficient and achieve greater impact if they collaborated more with each other and with other sectors. One way for them to do that may be to try a little less hard to be so strategic.
Brad Smith is president of Foundation Center.