Guest column – Building the future together

By Edward Skloot

Much of philanthropy, especially at the 100 largest foundations, with perhaps half the field’s endowment, works in isolation, rarely sharing the task or the results. We make grants based on inadequate due diligence, partially relevant information, or simple intuition.

After a grant is made we rarely share what we really know with grantees or with our own colleagues. We are novices at cross-program, cross-sector collaboration and rarely buddy-up for mutual gain. In fact, there are no incentives in philanthropy to do that. Finally, we don’t usually measure our successes, course-correct and learn intentionally.

Primarily, our work focuses on grantmaking. Grants are made on the basis of proposals. The submission requirements are sometimes over-detailed and arduous. The time it takes for funders to consider and disburse grants varies, from very quick to nearly endless.

Communications from program staff, and even senior executives, may be unclear. Foundations — as well as individual givers and corporations — have different filing requirements, deadlines, time frames and grant sizes, so nonprofits have to do some really fancy footwork to get by. Every year they are compelled to cobble together their operating — and capital — budgets from numerous, quite unconnected, quite idiosyncratic sources of capital.

This makes raising capital highly labor-intensive. It bends nonprofit executives away from focusing on strategy and operations. We all know that, sometimes, in order to start new programs, or keep old ones alive, nonprofits “adjust” their programs and chase the scarce foundation dollar.

Even when a nonprofit is successful traversing these rules of the road — whether it advances literacy or develops lots of job placements or builds affordable housing or improves community safety — more funding may still not result. Grantmaking can be so unpredictable.

For some funders, apparent success provides the opportunity to walk away and do something else. No reward here. For others, success leads to the reverse situation: increased funding. At times, these funders, correctly or not, urge nonprofits to expand their programs, or to replicate them in other places.

This push to “go to scale” is not regularly followed with ample capital to do the expanded job that funders encourage. When this happens, it exacerbates the undercapitalization of nonprofits and sometimes makes the nonprofit weaker, not stronger.

On the other hand, for some funders, it is failure that provides reason to continue funding. They think more money, time and effort would deliver the desired results. For still others, success or failure may be irrelevant. For unrelated reasons, they decide the time has come to alter their guidelines and head for the exit.

As an added twist, and all too frequently, large grants from a big funder signal others to shy away; they conclude that the first foundation “owns” the program and are reluctant to take a second position.

In these funding decisions, the effectiveness of grantees seems to have little relevance, according to research by Peter Frumkin and Mark Kim of the Kennedy School of Government at Harvard, and by Jed Emerson, an economic development expert now senior advisor to the Hewlett Foundation.

Finally, numerous funders are unclear about what kinds of funds may be available. They may not be frank about whether they provide start-up funds, bridge funds, long-term suppor, or capacity-building grants. Sometimes there is little clear signaling about how much capital may be available and the decision may take many months to find out.

So funders continually upend grantees’ expectations. Often they come through with smaller-than-anticipated grants. Occasionally they give more than asked for. The result, systemwide, is the massive undercapitalization of nonprofits due to widespread fragmentation of effort, poorly targeted dollars and inadequate communication bordering on secrecy.

We will never decisively improve the field of philanthropy until we learn to deal with each other more collegially and trustingly. Power relationships will never entirely disappear. But they certainly can be altered.

First, we need to begin by creating a reflective, safe environment, where funders and nonprofit executives can discuss their concerns over relationships, policies and strategies. Individual visions and styles can be affirmed or altered. This will as hard for nonprofits to do as for funders. Both need to find common, honest language and be willing to drop their protective armor.

Those with power should act first, possibly by joining with nonprofits create, track, scrutinize and assess grantmaking rules-of-the-road. They could trace what works and what doesn’t, and even prepare an annual report card.

A second step is mapping programs and “money flows” in each field, like arts or education or human services, in specific geographical areas. The money flows would include corporate and government dollars. This is seldom done, causing redundant or ineffective grantmaking.

Constantly mapping the system will tell us an awful lot about how the whole field interacts, changes and innovates. It will give a common baseline. We must compile these maps to help us to chart improved program and financing strategies, and we must share widely the information we derive.

Third we need to “co-create” value. Suppose we didn’t use money as our primary vehicle for getting and measuring results. Envision a new model, more like a network. It has several operating characteristics. It is driven by information and knowledge, which is shared constantly and purposefully among grantees and foundations, by web, print and constant personal connection. Relationships flourish. Mutual learning occurs. Technical assistance is constant. Metrics aid accountability, but they are determined jointly and shared jointly for mutual gain.

One consequence of this new concept of philanthropy would be to review the numbers of program staff and their talents. The role of the program officer shifts, as does the CEO’s. Their knowledge of the field, their maturity and their ability to collaborate becomes easily as important as their ability to analyze grant proposals. This shift, in turn, could lead to a review of the costs of staff relative to administrative overhead. Under a more embracing concept of its work, more money might need to go for more staff, performing a more comprehensive, relationship-and-information-focused job.

What could philanthropy be? I can imagine a system embracing ongoing, positive partnerships — among funders, among nonprofits and between them. They would work together under open, mutually agreed-upon and adaptable rules. The rules would be geared toward producing successful outcomes by sharing useful information, by learning together, by treating each other respectfully, by encouraging and using feedback, by leveraging resources from all the sectors.

I deeply believe the time has come to re-imagine our system of relationships and processes, and our goals, in order to move philanthropy to a more synergistic, creative and effective next phase. This is the task before us. None of us alone knows how to do it. But together, we can co-create our future.

Edward Skloot is executive director of the Surdna Foundation in New York City. His essay is adapted from his inaugural address at the Nielsen Issues in Philanthropy Seminar at Georgetown University on October 5, 2001, and also is being printed in the summer 2002 edition of The Responsive Community, a quarterly publication of The Communitarian Network in Washington, D.C.

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