The decision by The Atlantic Philanthropies to spend its $4 billion endowment by 2020 will encourage other organizations interested in following a similar path, an article by McKinsey & Company consultants says.
The process also will offer strategic, operational and organizational lessons for change management, the consultants write in their article, “A Nonprofit Goes for Broke,” published in The McKinsey Quarterly in its September 2006 edition.
With a mission to improve the lives of the disadvantaged, the private foundation announced in 2002 it would spend its entire endowment in 18 years, the article says.
The decision to spend down, which will require annual grants of $300 million to $350 million, will encourage other organizations interested in following a similar path, the article says.
While the idea that donors should give while alive, instead of saving up and giving through one’s will, has been talked about often, but it is rare that an organization takes this conviction to its “logical conclusion” by liquidating its assets, the article says.
Atlantic’s decision has facilitated changes in the way it gives money and manages its people.
The foundation has developed a more focused and measurable grantmaking system that aims to give fewer but larger grants to programs in which it can have considerable impact in the next three to five years, the article says.
It says the foundation also aims for a higher degree of engagement with grantees and intends to find nonprofits that can use funding as leverage to obtain greater support from other funding sources.
Following these new guiding principles, the article says, Atlantic has turned its attention to programs on aging, disadvantaged children, population, health and human rights, the article says.
The new strategy has had an effect on the foundation’s organizational structure, as well, resulting in a more integrated, global structure and greater operational support to evaluate the effectiveness of grants, the article says.
Atlantic’s experience highlights three important lessons, the McKinsey consultants say.
Staffers can be as troubled about uncertainty concerning change as they are about change itself, the article says, and encouraging staff to participate in its strategic decisions can increase motivation.
It also demonstrates the importance of communication between management and staff.
Although the effects of Atlantic’s decision to spend down has been challenging, “there is widespread agreement within Atlantic that the changes have increased its ability to improve the lives of disadvantaged and vulnerable people,” the article says.