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Community foundations face ‘strategy’ gap

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Community foundations

Community foundations

CEOs of community foundations believe strategy is important but few actually use it in their foundations’ work, a new report says.

CEOs who are strategic in working with donors “are guided by a focus on how their work with donors will benefit the community,” while CEOs who are strategic in their programmatic work “build their understanding of community need through research and data,” says Rhetoric Versus Reality: A Strategic Disconnect at Community Foundations, a report by the Center for Effective Philanthropy.

The report, based on interviews with CEOs at 30 community foundations with $50 million or more in assets, says the “gap between the rhetoric and reality” of strategy for community foundations may be the result of competition for donor resources, “resulting in a focus on donors as an end in itself rather than as a means to an end.”

So instead of connecting donors to the needs of the community,” it says, “donor relations are shaped by the personal needs and interests of donors.”

The U.S. is home to over 700 community foundations that together control $49.5 billion in assets, raise roughly $4.8 billion a year, and make grants totaling an estimated $4.2 billion, the report says.

But over the past 10 years, it says, competition for donor dollars has grown in the form of charitable gift funds and online service vendors, with many of them offering lower-cost options for donors.

The report cites a study by the James Irvine Foundation that argues a community foundation that acts “strategically” and actively seeks accurate information about community needs “will be better able to attract unrestricted funds” and will be seen as “a strategic investment vehicle” rather than “a vehicle for simple transactions that commercial charities can process at a lower cost.”

It also cites work by the Charles Stewart Mott Foundation that argues that strategic decisions made by community foundations can attract donors.

The Center for Effective Philanthropy defines “strategy” as a “framework for decision-making” that focused on the “external context” in which a foundation works and includes a “hypothesized causal connection” between the use of foundation resources and the achievement of its goals.

Among the 30 CEOs interviewed, the report says, only 27 percent are strategic in their donor work, only 20 percent are strategic in their programmatic work, and only 10 percent are strategic in both their donor and programmatic work.

Many of the decision-making processes at the 30 foundations were externally oriented, the report says, but those processes “were frequently not connected to any kind of theory or hypothesis about how those decisions would lead to the achievement of their goals.”

CEOs who are strategic in their donor work tend to work at foundations at which donor-advised funds account for most of the giving.

“The ultimate focus of decisions made by strategic CEOs in their donor work is what will be of benefit to the community – rather than how the foundation functions and survives,” the report says.

But CEOs who are partly or not at all strategic in their donor work describe goals — such as increasing foundation assets — that are “more removed from community benefit,” the report says.

“The focus strategic CEOs place on benefiting the community does not come at the expense of engaging donors,” it says. “In fact, strategic CEOs emphasize the importance of building relationships with their donors to a greater extent than their less-strategic counterparts.”

Strategic CEOs “engage differently with their donors, focusing attention on how funds are used,” the report says.

Those CEOs either make efforts to get donors involved with issues the foundation sees as important by educating donors about community needs, the report says, or they work to “understand clearly areas in which donors have expressed interest and then inform those donors or relevant new giving opportunities,” or both.

And in addition to cultivating existing donors, it says, strategic CEOS tend to focus on recruiting new donors.

CEOs who are strategic in their programmatic work are “data-driven,” the report says, turning to research or data about issues in the community to understand community need, and articulating “how that research or data relates to their efforts to achieve their goals.”

Strategic CEO also “emphasize seeking input from a variety of stakeholders,” and value their ideas and concerns.

They also work to “align donor giving with what is happening in the community by building donor knowledge to address community needs.”

In their day-to-day decision-making, the report says, strategic CEOs “place community needs front and center in every important decision in a way that the other CEOs do not.”

Strategic CEOs “do more to seek out research, data and external perspectives to inform their thinking – and they seek to educate and inform donors, rather than being simply responsive to what donors prefer.”
The report says it is possible that competition for donor resources “has led some community foundation CEOs to focus on being responsive to donor interests and needs in a way that undermines the foundation’s ability to work strategically.”

The focus on the donor “becomes an end in itself, rather than a means to community impact,” the report says. “This approach may not ultimately lead to the most success in donor work because it may erode opportunities for differentiation from other giving vehicles available to donors.”

The report profiles three foundations it says are strategic in working with donors or in their programs, including California Community Foundation, Community Foundation of the Eastern Shore, and Orange County Community Foundation.

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