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Aug 28, 2013

Who knows a community’s needs better: the nonprofits or the foundations?

Pablo Eisenberg has written an excellent summary of the debate, and controversy, over the merits of “strategic philanthropy.”  I high recommend this read.  It is long so I will summarize and excerpt.

Strategic philanthropy is a new term for a foundation determining what problem needs to be solved, identifying an appropriate solution, and then soliciting nonprofits to contract to provide that solution.  The controversy is how well a foundation board or staff can know and define the most pressing problems, assemble a practical and effective solution, and contract the best implementers — in contrast to drawing upon the skill and knowledge that nonprofits, who are dealing with community problems on the ground, can provide.  My writings in More Than Just Money make it clear that I too am skeptical that leaving out nonprofits’ knowledge and on-the-ground expertise can identify the most pressing problems and the most effective solutions.

“William Schambra, head of the Hudson Institute’s philanthropy center argues that [strategic philanthropy can] lead to expensive and exhaustive evaluations that are often meaningless. Instead, he says, foundations should listen more to community groups and the constituencies they serve to figure out where money is most needed.

“Paul Brest, who last year retired as chief executive of the William and Flora Hewlett Foundation, in his rebuttal to Mr. Schambra, acknowledged that community perspectives are an important ingredient of the philanthropic process but nevertheless seems impervious to the danger that a growing number of foundations and wealthy donors pose to the vitality of democratic institutions. His vision is based on the idea that the goals and priorities of nonprofits need to align with those of foundations, in essence saying that philanthropists should set the agenda for nonprofits.

“Such arguments make it clear why we now face a dangerous shift of the balance of power in the nonprofit world.

“Sixty percent of all American foundations today don’t accept unsolicited proposals, according to Brad Smith, head of the Foundation Center. Those grant makers give away one-third of foundation donations, or about $16-billion.

“Strategic philanthropy might be less worrisome if it were not practiced so often by very large foundations run by small, insular boards that do little to tell the public how they make decisions.

“The Gates foundation has just three board members—Bill and Melinda and Warren Buffett, whose money created the mammoth philanthropy.  No matter how smart or experienced the Gateses and Buffetts are, they are wrong to think they will get the best ideas from such a small board. It’s time for everyone in philanthropy to stop debating the merits of strategic grant making and whether everyone needs to measure results with statistical precision. Instead, let’s focus on what keeps philanthropy from solving serious problems: the unwillingness of foundations and big donors to realize they don’t have all the answers. Nonprofits should have a greater role in driving the agenda.”