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The Three Sources of Foundation Influence

March 09, 2016

Infleunce_magnetMoney, convening power, and knowledge give philanthropic foundations enormous influence and underlie their unique position in our socioeconomic ecosystem. Endowed by a wealthy family or individual, foundations are blissfully free from the kinds of pressures that drive short-term behavior in other sectors. They don't have to raise money from venture capitalists, the financial markets, or other foundations. They never awake to the terrifying news that that their business is threatened by a new competitor. And they don't have to kiss babies in order to garner votes.

Like grizzly bears, lions and tigers, foundations have no natural predators.

Despite this enormous freedom, many foundations traditionally have professed humility and maintained a low profile — either because of their donor's wishes, a belief that it's their grantees that do the real work, or because of the personality of their leader. Increasingly, however, foundations are waking to the enormous potential they have to wield influence in their home cities, countries, and around the world. And encouraging others to adopt their causes, strategies, and ways of working is coming to be seen as the way foundations can increase their impact many-fold.

Let's look more closely at the three sources of foundation influence.

Flexible money

First and foremost is money. Foundations have an abundance of what nonprofit organizations, social entrepreneurs, and the social sector writ large chronically lack. Nonetheless, they tend to be conflicted about their wealth: foundations will tell you without much prompting how many millions or billions in assets they have, only to claim in the next sentence that their resources are small in relation to the world's problems. Collectively, the nearly $800 billion held by American foundations pales in significance to the hundreds of trillions coursing through the international capital markets. But that misses the point.

Foundation money is one of the last remaining sources of capital on earth without a significant claim on it. As a result, the dollars granted, loaned, or invested in social and environmental causes have tremendous potential for leverage. Public institutions may have large budgets, but in most cases those funds are so thoroughly earmarked that they are left with virtually no "risk capital." Talk to any foundation professional who has answered a call to form a partnership with a government agency, the World Bank, or any other large multilateral institution and she inevitably will express surprise about being asked for a grant. Indeed, many of the private-public partnerships that are viewed as the key to impact and bringing an initiative to scale began with a small foundation grant that served to lever more significant public funding.

Convening power

Foundations, even those of moderate size, have enormous convening power. In part, this is due to the fact that they're in the business of giving out money, which ensures that their invitations will be accepted. But there is more to convening power than meets the eye. While money may be the draw, it is foundations' neutrality that makes them so effective at convening. "Neutrality" doesn't mean that foundations don't have a point of view on issues near and dear to them; rather, it means they don't (typically) have a dog in the fight. And because they don’t push products, fund-raise, or promote partisan political interests, foundations are in the privileged position of not competing with other organizations from the private, public, or nonprofit sectors. In fact, their only competitors tend to be other foundations — and in most cases those are situations in which personalities and reputation make collaboration between foundations more cumbersome than it needs to be.

Convening is an increasingly powerful component of the philanthropic toolkit that enables foundations to leverage their "voice." To get an idea of how powerful, simply go to GrantCraft and type "convening" into the search box. Following the links in the list of search results, you can read about specific examples like that of the James Beard Foundation, which used convening as way to leverage its reach and brand equity and catalyze a new way for people to look at food. You can also access publications like Gather from Monitor-Deloitte and the Rockefeller Foundation that provide step-by-step guidance to the art and science of convening.

Accumulated knowledge

Of the three sources of influence, a foundation's own knowledge is the most underdeveloped and least utilized. Every day, foundations are exposed to the best and the brightest in virtually every field of human achievement, people who seek support for their efforts to make the world a better place. The ideas, hopes, and dreams they share are captured in conversations, grant proposals, progress reports, and various publications — the vast majority of which vanish into the Bermuda Triangle of the foundation, never to be seen again. Increasingly, this enormous influx of information is digital, meaning it can be analyzed using technologies whose sophistication is growing by leaps and bound. In any other field, this information would be considered a goldmine by data scientists and researchers looking for patterns, correlations, and insights that could be used to modify strategies or make breakthroughs in addressing important challenges. In philanthropy, however, this information is collected and consumed almost exclusively for the purposes of approving grants and monitoring the progress of those grants, while a small fraction of it serves as grist for consultants' reports or evaluations, most of which yield written documents that remain locked within foundations themselves or circulated quietly and with restrictive copyright provisions.

Foundations know a lot, but they are only beginning to wake up to the need to develop a culture and practice of managing and sharing their knowledge. Some, like Hewlett, Open Society, Ford and Gates, require that research supported by their grants be open-licensed so it can be freely shared. But even the foundations that believe in open access to knowledge tend to think of it as something they fund rather than do themselves. For a new philanthropist it can be remarkably difficult to find out what other foundations already know about a given issue.

Philanthropy remains an $800 billion industry in which over-reliance on personal networks is the norm. One thing I have learned in my eight years at Foundation Center is that the people in those networks only know what they know and, more often than not, operate unaware of the large number of foundations and other funders that may be working on the same issues to which they are so passionately dedicated. In response to that reality, Foundation Center has developed a suite of Knowledge Services so that funders and those that advise them can leverage each other's knowledge, reduce barriers to collaboration, and greatly expand the influence of which foundations are capable.

In a world of hyper-partisanship, market orthodoxy, and self-promotion, foundations are needed more than ever. By openly sharing their knowledge, bringing diverse people to the table, and funding new ideas, foundations can influence the way in which key challenges are defined, addressed, and resolved. As more foundations develop the culture, behaviors, and skills to do that, we will get closer to realizing the enormous potential of philanthropy.

Brad Smith is president of Foundation Center. In his previous post, he wrote about disaster philanthropy and why it matters.

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Posted by Marc Gunther  |   March 09, 2016 at 04:24 PM

These are great points, particularly around sharing knowledge and insight. While some critics worry that foundations have too much power, this is an argument that they don't use the power they have as effectively as they can.

They have a fourth source of influence as well--their investments, and in particular their freedom to invest at least some of their assets in ways that advance their social and environmental goals. This, too, is an underutilized resource.

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