posted on: Friday, April 09, 2010

by Julia Craig

“We like to think of ourselves as underwriters of innovation and catalysts for change, but it is moments like this that reveal just how risk averse we really are… If there was ever evidence of the position of privilege that foundations occupy, it is that we could choose to put the narrow self-interest of our own financial replenishment ahead of the crisis in which nonprofits find themselves and the historic challenge this moment presents” (emphasis added). So argues Thomas David, Senior Strategist with the Community Clinics Initiative in a recent article published by Grantmakers in Health. The provocative and compelling piece, A Defining Moment for Health Philanthropy, is well worth the full read for any grantmaker. It’s full of lessons not only for health funders but for any philanthropic institution.

David sets the stage for his challenge to foundation culture with survey data: in the first quarter of 2009, only 12 percent of the 1,000 nonprofit leaders surveyed expected to operate without a deficit that year. And, 93 percent of the surveyed organizations, all of which serve vulnerable communities, saw an increase in demand for their services.

But foundations have “taken a hit” too, right? Many have seen their endowments drop precipitously over the past year. David challenges this way of thinking by pointing out that from 1988-2008, foundation assets more than quadrupled. Think about that. David argues that it may be because of this tremendous growth in assets that foundations are fixating on the loss, instead of recalibrating their baselines and shoring up their nonprofit partners through the storm.

David goes on to talk about how foundation culture contributes to an attitude of risk aversion: like banks, they seek to protect their assets; like universities, they silo departments internally; and most importantly, the power that foundations possess by virtue of their money and their relationship with grantees comes with what he calls a “seductive burden.” He contends that as a result of this power, foundation leaders become detached from the reality in which their nonprofit partners live. Some even become suspicious of those who would give critical feedback to their practices. So how can foundations break free from their own established norms and practices, particularly to address the pressing needs of their communities?

David suggests health foundations seize the moment and make a commitment to fulfilling their mission in the following ways (and again, I’d suggest this applies all foundations):

• Initiate an institution-wide conversation about risk.
• Recalibrate your endowment baseline
• Increase your grantmaking this year.
• Ease up on control of your grantees.
• Make some big bets.
• Get serious about mission-related investing.
• Invest in advocacy.
• Share what you are learning and thinking.

Big props to Thomas David for taking on his peers!

What do you think it will take for foundation leaders to take a brave stance in the face of uncertainty? What would you add to David’s suggestions for how foundations can commit to their nonprofit partners through the recession?

Julia Craig, research associate at the National Committee for Responsive Philanthropy (NCRP), recently co-authored Strengthening Democracy, Increasing Opportunities: Impacts of Advocacy, Organizing and Civic Engagement in Los Angeles County.