Q&A: A Conversation With Paul Brest

A few weeks ago, I had the opportunity to speak with Paul Brest, president of the William and Flora Hewlett Foundation, about the impact of the economic crisis on Hewlett and other foundations, the importance of a strategic approach in philanthropic work, the elements of such an approach, and why the stakes have never been higher. The following is an excerpt from our conversation....

Philanthropy News Digest: So, here we are fourteen months into what some are calling the worst financial crisis since the Great Depression. How has the Hewlett Foundation been affected by the turmoil in the markets? And should we expect to see the foundation's overall grantmaking decline in 2009?

Paul Brest: The value of our endowment has declined significantly. One difficulty that many endowments have is trying to value alternative assets; if you have them, it's a little bit harder to get an accurate valuation. But there's no question that it's down. Nevertheless, we plan to make good on all of our existing commitments. Our grants budget for next year will be down a little bit, but we feel that we'll be able to keep the reductions manageable. We have a range for our payout, and we'll probably be paying out closer to the high end of that range. We have also been working over the last couple of weeks on reducing our administrative costs in a way that does not impact the strategic nature of our grantmaking.

PND: Based on your conversations with colleagues and friends, are other foundations -- in the Bay Area and around the country -- in the same boat?

PB: Everybody is in the same boat with respect to the decline of their endowments. But I have not heard of a major foundation that has said it is not going to keep its commitments in 2009. And my guess is that most foundations are going to look to reduce their administrative costs.

PND: In a conversation I had last month with Matthew Bishop, the New York bureau chief of The Economist and co-author of a new book about philanthrocapitalism, Bishop suggested that this is precisely the moment when wealthy donors and foundations need to step up and extend themselves on behalf of their grantees and the nonprofit sector. Do you agree?

PB: I would put it differently. This is a moment when individuals and foundations need to be very focused and intentional in what they do. If ever there were a time when strategy and clarity about goals was important, this is the time. In terms of foundations stretching themselves, that goes to the fundamental question, which we address in the book, of whether foundations should exist in perpetuity or should spend themselves down over a fixed period of time. Especially for foundations not committed to perpetuity, this may indeed be a time to stretch.

PND: Is this a time for foundations to be raising their risk profile?

PB: The risks a foundation takes have to do with what it expects the social return on its investments to be at any given time. I'm not sure that the current financial situation changes that in any significant way....

To read the complete interview, click here.

-- Mitch Nauffts