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Philanthropy's Digital Divide

May 03, 2010

(Bradford Smith is president of the Foundation Center. In two previous posts -- here and here -- he introduced the center's Glasspockets initiative and made the case for why foundations need to be more transparent.)

Digital_divide The digital divide is fast becoming a thing of the past in the world, but it's still alive and well in philanthropy. American school kids, Sao Paulo subway riders, and Mumbai street vendors are part of a global army of
4.8 billion mobile device subscribers. Smartphones, netbooks, and Kindles are fast becoming the must-have appendages of modern life. Meanwhile, in a Foundation Center survey of 11,000 U.S. foundations, only 29 percent reported having a Web site.

Why are so many foundations -- tax-advantaged institutions that use private wealth to promote the public good -- so invisible when it comes to online transparency? It certainly isn't a question of importance. Collectively, America's foundations manage
$580 billion in assets and make some $43 billion in grants every year. Anyway you look at it, that is real money being spent on things people care about a great deal -- health, education, the arts, environment, and social justice among them. The reasons lay elsewhere and no one explanation applies to all foundations.

"We're too small to have a Web site."

America has an extremely diverse foundation sector. While the top 1,000 U.S. foundations account for close to two-thirds of annual giving, there are another 74,000 foundations making grants every year. In the same Foundation Center survey mentioned above,
76 percent of foundations said they had fewer than four staff. Among these are a large number of foundations that are essentially a husband, a wife, and a checkbook. We should expect the Ford Foundation, which spends more than $500 million a year in grants, to have a pretty good Web site, and it does. But what would be the value to grantees or others if more small foundations put themsleves online?

In fact, there can be real value. Take the example of the KDK Harman Foundation in Austin, Texas. They have a great Web site that includes their theory of change and logic model, a searchable grants database, evaluations of individual projects, and a wealth of resources on other topics such as how to start a foundation. All this from a family foundation with a handful of staff and an annual grants budget of $1 million.

"We want to help people, not spend money on ourselves."

No one who is wealthy is obligated to create a foundation. They do so out of compassion, indignation, faith, and/or a desire to give something back to a world that helped make them successful. Understandably, donors want to see as much of their money as possible go to people who need it and not to rent, salaries, fancy publications, and Web sites. If they stick with their philanthropy, however, these attitudes may change as donors realize that achieving impact may call for more infrastructure than they originally anticipated and that finding partners who can leverage their giving requires greater visibility.

"If we create a Web site we will be flooded with proposals."

For every grant approved by a foundation, an average of ten to twelve are rejected. While it may be too much to expect sympathy from nonprofits, by far the most difficult part of a funder's job is saying "No" to them. Everyone wants to be liked and saying "No" doesn't help very much in that category. Sitting in judgment of other's hopes and dreams is uncomfortable. And the sheer workload of sifting through all those proposals and trying to construct a rationale to approve a few and decline the vast majority is considerable.

There are two schools of thought on this. One is that clearly stating program goals, decision-making criteria, and application procedures will guarantee that a foundation receives more well-targeted proposals and fewer extraneous ones. And in today's digital world, a Web site is the best means for communicating such information. For the Foundation Directory Online, the Foundation Center combs more than twenty different sources of information (including Web sites, where they exist) to clearly convey the interests, priorities, and procedures of foundations. Nonprofits tell us that this helps them find the foundations most likely to be interested in their work rather than waste time on those that are not.

On the other hand, many believe that the greater the visibility, the more a foundation will be overwhelmed by grant proposals. They will be required to spend good money that could be used for grants on processing large quantities of requests they ultimately won't support. A Web site would only make matters worse. Or, if they decide to put up a Web site, they often include a statement to the effect that "The foundation does not accept unsolicited proposals." But hope springs eternal in the heart of a nonprofit, and some do still send proposals. However, foundations have a simple and straightforward reason for not responding or rejecting them out of hand.

To my mind, any foundation that receives a tax exemption on its investment income in exchange for contributing to the public good should allow the public (in the form of nonprofits) to freely apply for grants. This goes against the grain of some current thought about strategic philanthropy, but that is a topic for another blog piece. Even highly strategic foundations can balance their desire for impact with their public purpose by maintaining at least one program that accepts open applications. Alternatively, they can adopt the slightly less foreboding language that seems to be cropping up on a number of foundation Web sites: "The foundation does not encourage unsolicited proposals."

"We want to protect our privacy."

Few of us who work in foundations or write about philanthropy in blogs like this one have any idea of what it is like to be truly rich. Yet many small foundations, and a number of very large ones, are directly linked to wealthy donors or their heirs. For them, the foundation is much more family office than institution. It is motivated by personal passion to do good in the world and educate successive generations in the responsible use of wealth.

By choosing to create a foundation, families risk a very precious commodity -- their privacy. They have legitimate concerns, ranging from being constantly harassed by people who want their money to the safety of their children and grandchildren. The concerns and fears of individuals who live at the very top of the economic ladder are as difficult for most of us to understand as those of people who live at the very bottom.

Putting one's foundation online is a major decision for most families and not taken lightly. But it is becoming more inevitable. The availability of public records and massive amounts of journalism, analysis, and opinion online is making it virtually impossible to remain invisible. Increasingly, families are faced with the dilemma of proactively telling the story of their philanthropy online or leaving a digital tower of Babel to tell it for them.

"We believe in maintaining a low profile."

There is a long tradition in American philanthropy of maintaining a low profile -- even to the extent of remaining anonymous -- and letting one's good works speak for themselves. This has religious and moral roots that go back to the earliest of the country's great philanthropists and continues through today. As Andrew Carnegie put it: "Surplus wealth is a sacred trust which its possessor is bound to administer in his lifetime for the good of the community." Paul Allen said it another way: "When it comes to helping out, I don't believe in doing it for the media attention. My goal is to support the organizations that need help."

For some, the whole idea of having Web sites and using social media is tantamount to blabbing about yourself all over the Internet. Philanthropy is supposed to be about the people and organizations one supports and the difference they make in the world. Many wealthy donors do name their foundations after themselves as well as theaters, research institutes, and hospital wings, but this is often about leaving a legacy and inspiring others to follow their example of charity and philanthropy.

"We don't understand all this new technology."

Some donors simply find the Internet, Twitter, streaming video, Web apps, and the like to be tremendously intimidating. They don't know where to begin and let the mountain of their own learning curve serve as an impediment to ever getting started. Going online seems to require an enormous amount of time and resources, neither of which they feel they can afford.

In part, this is generational. I remember once asking someone in a family foundation if they could give the Foundation Center their grants data in an Excel spreadsheet, and she laughingly and lovingly replied: "We won't be using those kinds of things until Mom retires!" To be fair, the technology is a bit intimidating and evolving at a dizzying pace. When you see the picture of two adorable twins brandishing their iPhones in the April edition of Fast Company, it is easy to feel hopelessly left behind. But the truth is, it is a global minority of cyber geniuses that truly understand all the latest stuff. It would take a lot to put foundations on the cutting edge of digital technology but very little for more of them to get on the playing field.

Facing the Inevitable

At some point in the future, perhaps not too far away, most foundations will feel compelled to be online. There are so many reasons why this would be good for philanthropy, but the first and foremost was stated clearly by Russell Leffingwell: "...the welfare of these great constructive foundations with which I am familiar, and their opportunity for usefulness, are constantly threatened by a confusion in the minds of the people about what is a foundation." Leffingwell was no angry watchdog; he was a Republican banker who chaired the Carnegie Corporation. And he had good reason to feel this way, testifying as he was before a 1952 congressional committee that had taken it upon itself to investigate foundations for support of un-American activities.

The Foundation Center was created by visionary foundation leaders who strongly felt transparency was the best response to congressional skepticism. When the center opened its doors in 1956, transparency meant 7,000 documents stuffed in file cabinets for public inspection. Later on it meant staff going to the IRS to hand copy information from foundation tax returns and publishing it in large print volumes. Over time, many of those publications became CD-ROMs and the Foundation Center launched its first Web site in 1994, when only three U.S. foundations had Web sites of their own.

In 2010, transparency for the sector means getting as much data from foundations as possible through electronic feeds and making it available through online databases. It also means designing and hosting Web sites for startup foundations and a new Web platform, Glasspockets, that highlights the many innovative ways in which America's foundations are improving their own Web sites, experimenting with social media, and telling the story of philanthropy online.

People in foundations underestimate just how closed and mysterious they can seem to folks on the street. Quietly serving the public good, as noble a pursuit as it may be, can often generate more questions than admiration. Transparency remains the best way to answer those questions and, in today's world, that inevitably means putting your foundation online.

-- Brad Smith

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Posted by Bruce Trachtenberg  |   May 03, 2010 at 12:49 PM

Very interesting post and full of lots to think about. But I hope we'll also use more definitive standards about what constitutes foundation transparency -- or good communications -- than just having a website or having an online presence.

Not all websites are created equal and not all necessarily provide all the information people want. The bigger question is what's the overall approach a foundation takes to being open, transparent and even accountable? Does it have a strategy for doing those things?

As a side note, many in the Communications Network are debating whether to continue publishing annual reports -- long considered an important element of foundation "transparency." These days there's little evidence ARs get read or do a good job communicating value.

Similarly, just having a website doesn't qualify as effective communications. Instead, it's how the website supports your overall goals, serves potential audiences by giving them access to information and to what they want and need to know.

It's that strategy thing again!

Posted by Bradford Smith  |   May 03, 2010 at 05:12 PM

Bruce, insightful as always. I agree that websites are not synonymous with transparency but transparency requires a minimum of visibility. And it's getting harder and harder to be visible without some kind of web presence. The reason some foundations are considering no longer publishing their annual reports is because the same information can be found on their websites, right?


Posted by Tim Walter  |   May 05, 2010 at 10:04 AM

Brad, you make many excellent points, and we at the Association of Small Foundations do encourage our members to establish a web presence that they can control.

A few thoughts.

First, I'd bet half the foundations in existence aren't really active yet, as they wait for a donor to fully fund the foundation, often as part of an estate gift. Thus, maybe we can raise your figure of 29% by double, and estimate that about 58% of active foundations have websites. See -- progress in one day! :)

Second, it is good to focus on the practical, as the majority of foundations are run by volunteers in their free time. A website is essentially free and easy to construct with the help of the Foundation Center, and we at ASF do emphasize that it is a way to limit the number of unsolicited proposals.

Finally, let's keep in mind that the market for foundation information -- grantees -- rely on Guidestar, FoundationSearch or Foundation Center datasets that provide a comprehensive picture of the foundation landscape. In some ways, transparency through these vehicles is relatively cheap at one's desktop, and some are available for free in libraries. These datasets place foundation transparency many levels above available information on government spending or on activities of individual donors whose gifts are not made public via charities' tax returns. I say this not to downplay the importance of communicating, just to note that when I speak to policymakers, the foundation community's progress can also be seen as a bright spot to those promoting transparency.

Tim Walter
Association of Small Foundations

Posted by Philippe Boucher  |   May 05, 2010 at 05:44 PM

Thank you for supporting more transparency and using the internet to be transparent. It is true it is also quite easy to bury documents on line and make it difficult for people to find the adequate information but let us keep pushing for more sunlight.

Posted by Akwasi Aidoo  |   May 05, 2010 at 06:14 PM

Brad, this is a very thought-inspiring post. At the end of it, I pondered the following question: Is there any sense and a future in like-minded foundations sharing clustered websites, in the same way as many of them now belong to affinity groups? Perhaps this can be one way for foundations to really model the often-stated value of the philanthropic sector, which is collaboration and partnership. Why not?

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