February 10, 2014 From the President

Setting the record straight: debunking philanthropic myths

When you set up a foundation, or join its board, you might have in the back of your mind some beliefs or preconceptions about foundations and charities. In the December issue of Alliance Magazine, Page Snow, the chief philanthropic officer at Foundation Source, takes on some of these beliefs about current practices of organized philanthropy, among them, that:

  • foundations typically operate at arms-length from charities, identifying grantees through proposals or requests made to the foundation.
  • they make grants based on clear evidence of impact
  • they are proactive in telling organizations specifically what to do with their grants.
  • they don’t like to give general operating support, and
  • they aren’t interested in the social impact of their investments.

To examine these so-called “myths” more closely, Foundation Source carried out a survey of its clients last fall. The results indicate that, far from adhering to these assumptions, many of their clients “fail to follow the story line”. The survey showed that a very large majority of foundations find and choose organizations themselves, not simply in response to requests made.  And they don’t initially select their grantees based on objective evidence of results but through personal knowledge of or previous experience with an organization. Three-quarters of the foundations surveyed said that they trusted their grantees to take the lead and did not follow a proactive approach of carrying out their own vision and ideas through grantees (although almost a quarter do). And nearly half of the respondents typically provided general support to their grantees, without restrictions. The survey also indicated that over half of the respondents had not collaborated with other foundations in the past year and had no plans to do so.

Are these results surprising? Not really in my view. Foundation Source’s survey replies were drawn primarily from foundations with assets less than $50 million. In most of these foundations, the grantmaking activity is carried out by board volunteers or a very small staff. The philanthropic decisions tend to be influenced by the personal interests and experiences of board members, and they trust their grantees to do something of public benefit with their funds, without much shaping or direction from the funder. And most small foundations do not feel that they have the capacity to find collaborators or to take on what they perceive to be more time-consuming work in collaboration. This makes sense given limited resources. But it also reminds us that there isn’t a single “better” model of foundation philanthropy. Both smaller and larger foundations can and do pursue this informal and personal style of grantmaking. Equally, both small and larger foundations can choose to be more proactive and systematic in their decisions about who to work with and what results to expect.

One heartening and surprising, to me, survey response was to the question of impact in vesting. Nearly half of Foundation Source’s clients, small as they are, said that choosing investments that further their foundation’s mission was even more important to them than financial returns. This certainly suggests that more funders are going to be asking more questions of their investment advisors about opportunities that provide both financial and social returns.

Does this picture resonate in Canada? Is this is a snapshot in time of a situation that may be in fact evolving rapidly as we see more generational change and more entrepreneurs creating foundations?

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