By John Quintero
Writing recently in Philanthropy Journal, Tony Pipa of the Warner Foundation warns against altering federal policies towards foundations, as proposed in legislation before Congress.
Pipa argues that preventing a foundation from counting its administrative costs toward the required minimum payout could limit a foundation’s organizational capacity.
Yet if organizational capacity is critical to success, why do many foundation practices hinder nonprofits from developing their own organizational abilities?
Pipa rightly notes that effective foundations must spend on administration and staffing.
Good foundation employees, for example, are essential for identifying worthy nonprofits, creating partnerships and generating the ideas and policies capable of addressing social needs. Limiting a foundation’s ability to pay for staff, according to Pipa, would “unintentionally weaken an important part of our nonprofit sector.”
If organizational capacity — described by Christine Letts of Harvard’s Hauser Center for Nonprofit Organizations as the “the ability to develop, sustain, and improve the delivery of a mission” — is so important, why do many foundations not encourage nonprofits to develop that capacity?
When awarding grants, many foundations focus much more on interesting projects than on institution-building. Foundations often fund a wide mix of interesting projects for a year or two and then move on to new projects.
This behavior creates an environment that discourages nonprofits from building organizational capacity.
Many nonprofits, especially smaller community-based organizations, often arise from innovative ideas generated by individuals highly committed to a social mission. Good ideas and people, however, are not enough to create a sustainable organization.
A strong organizational infrastructure also is required, but nonprofits frequently are not rewarded by foundations for developing management and administrative abilities.
This reality often leads nonprofits to ignore management issues and focus on developing programs designed to attract another round of funding. Yet without the systems necessary for implementing promising ideas, many wind up failing or floundering.
Some foundations have become aware of this problem. The Ford Foundation has worked to promote more effective philanthropy though the GrantCraft Project, and North Carolina’s Mary Reynolds Babcock Foundation has addressed the issue.
And academic groups like Harvard’s Hauser Center and the Center on Philanthropy at Indiana University have created an intellectual underpinning for more effective philanthropy.
While foundations are right to consider the impact that changes to the federal payout rules might have on their own organizational capacities, the debate exposes an interesting contradiction in the philanthropic world: If foundations need strong organizational infrastructures to succeed, don’t the nonprofits they fund need that, too?
John Quinterno is assistant director for the Program on Southern Politics, Media and Public Life at the University of North Carolina at Chapel Hill.