Helping foundations improve their effectiveness – when philanthropy puts data and relationships at the center

There are about 87,000 grantmaking foundations in the U.S., giving $60 billion a year (about 17% of the total U.S. private, charitable giving) and holding about $865 billion in assets. However, only about 3,000 give away $5 million per year or more.

This last subset is the primary focus of the Center for Effective Philanthropy (CEP), a nonprofit organization established in 2001 to improve funders’ effectiveness, based on the idea that foundations sometimes lack access to basic information that would be helpful in their efforts to continually improve their own work.

In our interview, Kevin Bolduc, Vice President – Assessment & Advisory Services at CEP, walks us through some themes that are shaping the work of foundations in the U.S. and highlights the challenges of building successful funder-grantee relationships.

Who built the case for the birth of CEP and how did it develop?
The idea was originally launched by two social entrepreneurs, Michael Porter of Harvard Business School and Mark Kramer of FSG. They presented their thoughts to a number of foundations and a few immediately caught the potential of this movement — The Atlantic Philanthropies, Surdna Foundation, and the David and Lucile Packard Foundation.

Through a seed grant, Phil Buchanan was hired as president of CEP in 2001 and has led it ever since. I also joined CEP at that time, when we were essentially just a research project to investigate the question of how foundation leaders were assessing their own performance as funders (as opposed to simply assessing the work of their grantees). From those first studies we began to create a series of indicators, research studies, and assessment tools that foundations could use to gauge their effectiveness. That was the genesis of our work. It has expanded ever since and we now have offices in Cambridge, Massachusetts and San Francisco, California and work with foundations around the world. One of our first steps was the creation of the Grantee Perception Report (GPR), an assessment which rigorously collects grantees’ feedback and allows benchmarking across foundations.

Do you think that giving based on results is gaining momentum with donors?
I think there are mixed opinions on whether this phenomenon is gaining ground. In my perspective, it is. When CEP started 15 years ago, we had a hard time convincing many foundations about the idea of measuring their own effectiveness in comparison to others; it was quite a radical thought. Many funders perceived their own work as so unique that it was pointless to make comparisons across foundations. Now we see again and again that foundations are looking to each other for data and best practices about what’s effective.

There has been a huge rise in the demand for this kind of information. When we look at our own data over time we see a growth in the numbers and types of foundations engaging with CEP in general — including foundations not just in the U.S., but also around the world. And more and more foundations are collecting and even publicly sharing information about their effectiveness.

I think we’re witnessing a positive shift in grantmakers’ attitudes towards funding effectiveness, but I wish there were even more progress. Let me share a few examples. There has been a lot of talk about providing general operating support to grantees. While some foundations have been making steps forward, the overall amount of general operating support provided has not changed that much in the last decade, according to the data collected by the Foundation Center.

There’s also still a disconnect between the perceptions of foundations and their grantees on the topic of supporting grantees’ capacity to assess their own performance. And if we want funders to give based on data – and I think we do – then we need to support nonprofits efforts to collect good data and use it well! In recent research, 75% of foundations reported that they were supporting nonprofits either with money or non-monetary assistance to collect data. But 75% of nonprofit leaders reported they were not receiving this kind of support!

“In my optimistic view I am seeing progress, but there is still so much to do especially on the funders’ side.”

In addition to providing assessments, CEP does research on foundation effectiveness. What are some of CEP’s most significant findings in these last couple of years?
I’ll share two key findings: the first is from research we just released, called The Future of Foundation Philanthropy: The CEO Perspective, in which we interviewed foundation CEOs about the potential of philanthropy to make real impact. What we found is very interesting: about two-thirds of foundations said it was possible for foundations to make a significant difference in society, but only about 10% reported that foundations are currently making a significant difference. So there’s a sort of aspiration gap between what CEOs perceive they are achieving now and what they think it would be possible to achieve. Moreover, the current barriers that they identified as standing in the way of greater impact are actually things in their control — such as lack of clarity, having too many goals, the need for a mindset shift toward more risk-taking, and possible untapped partnerships.

Another topic we have been researching for more than a decade is the need for foundations to have strong relationships with their grantees. What has become really clear over time is that we can predict whether a funder-grantee relationship will be strong by assessing some typical drivers, such as a funder’s transparency about its work or its depth of understanding of its grantees’ social, cultural, and socioeconomic context. These are aspects that funders can ask their grantees about, focus on, and, if necessary, improve. In fact, that’s what our Grantee Perception Report sets out to help funders do!

“We witness a sort of aspiration gap between what foundation CEOs perceive they are achieving now and what they think it would be possible to achieve.”

And what are the most common and urgent requests you receive from the foundations you assist?
One of the most common questions we get is: “What’s the best way for a funder to create the most impact?” Everyone is looking for the one “best” answer to that question. But here’s the thing — there’s isn’t one best answer. The best approach to impact always depends on the choices a funder has made about it goals, the context it works in, and the values it holds.

Here’s an example. We often get asked about what kind of assistance a funder should provide beyond a grant. But the findings from our research are very clear: there’s no single type of non-monetary assistance that’s always helpful. In fact, when grantees are receiving a single piece of assistance beyond their grant (e.g. introduction to useful contacts) it does not make much of a difference in the grantees’ perception. But once a foundation provides multiple types of non-monetary support to a single grantee, then it starts to have a more radical effect on grantees’ perceptions that the foundation is improving their ability to work effectively.

“This type of aggregated non-monetary assistance does make a difference but a funder also has to be mindful and it takes resources at the foundation level in terms of time and skills needed to do this well.”

Would you list any best practice among U.S. foundations?
One of the things we try not to do at CEP is proclaim that there are best and worst foundations. But we do profile foundations that share results of our assessments publicly and that are getting particular aspects of their work right. For example, a foundation which is seen by its grantees to create a tremendous impact in its fields and to advance knowledge and public policy effectively is the William and Flora Hewlett Foundation in California. Another example on the topic of forming strong relationships with grantees by combining a clear strategy, focus on capacity building, and attentiveness to the quality of interactions is Wilburforce Foundation in Seattle, Washington.

Are impact investing practices spreading among U.S. funders?
While some foundations believe that impact investing can be an important tool to experiment with, the amount of money they are dedicating to it is still extremely small. To put some numbers behind that statement, CEP research found that about 50% of foundations are either engaging in impact investing or seriously considering doing so. However, they are only dedicating to it about 2% on average of their endowments and only 0.5% of their programmatic budgets. In our latest research, we asked foundation CEOs about the most promising practices in their opinions that would help foundations achieve their maximum impact, and only about 30% of foundations indicated impact investing as one of the most promising practices. Compare that to the 69% that said that a promising practice was seeking to better learn from the experiences of the beneficiaries foundations are ultimately trying to help.

“There is a lot of talk on impact investing among foundations but the action is still low.”

Do you foresee any major challenge for foundations following the 2016 elections?
That is a question that we are going to pose to foundation CEOs soon. But here’s my opinion: some of the most visible foundation success stories over the last decade are likely to be at risk due to the changing political environment. Just look at the Robert Wood Johnson Foundation or at many health-focused foundations that worked to achieve greater access to healthcare and contributed to achieving the Affordable Care Act (or ObamaCare as it is most widely known). The incoming administration has made it very clear that they want to repeal that act. Or if you look at the work of foundations and other social sector organizations that advance the cause of gay marriage or immigration rights, the signs are not positive.

The work of many foundations may shift from being on the offensive to being more defensive. In other words, they may be left trying to protect the progress that has already been made rather than focusing on further advancing that progress. Of course, for some foundations the incoming administration could also be a positive shift, so I don’t think there will be a unified reaction. I do believe, though, that every foundation must be reflecting right now on how this changing political environment is going to affect its work and if it should reconsider its organizational strategy.

For further information: http://www.effectivephilanthropy.org/