Nonprofit Chronicles

Journalism about nonprofit organizations and their impact

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When it comes to sharing what they know, foundations are, alas, uncharitable.

That is the most striking finding of a report on foundations and transparency published last week by the Center for Effective Philanthropy.

The 52-page report, called Sharing What Matters: Foundation Transparency, is based on surveys with 145 foundation CEOs and more than 15,000 grantees, as well as reviews of more than 70 foundation websites. It’s thorough.

Foundations do a good job of sharing their goals, strategies and grant-making processes, the CEP researchers found. That’s all well and good. But..

..when it comes to being transparent about how they assess their own performance and share lessons learned from what has worked and what has not, foundations are less transparent, despite believing that it’d be beneficial to do so — and both funders and grantees are missing opportunities to learn and improve.

This is dismaying.

A few findings: Fewer than one-third of foundation websites describe how the foundation assesses its work. Fewer than one-fourth of websites share “information about strategies that have or have not worked for the foundation.” Just five percent “share information about projects that did not reach intended goals.”And only four percent include “a comprehensive assessment of overall foundation performance.”

To those of you who are immersed in the world of foundations and nonprofits, where foundations hold sway and answer, in the end, to no one but themselves, these findings may be ho-hum. But as a newcomer to the sector, I’m troubled by the way that most foundations — not all, but most — seem to go about their business with little or no accountability.

After all, foundations exist to make the world a better place, by alleviating suffering or promoting well-being. They ought to deploy all of their resources–their grants, their investment assets and their knowledge–to those ends. But they don’t.

All foundations make grants, with varying degrees of impact. This isn’t discretionary. Most are required by law to distribute 5 percent of their assets annually for charitable purposes.

As for their assets, they could invest their money in ways that are designed to generate social and environmental benefit and minimize harm. Most don’t. Instead they focus purely or principally on maximizing returns, whatever the consequences. That’s a missed opportunity.

Finally, they can share their knowledge and insights, but the Center for Effective Philanthropy report indicates that they are falling short in that regard as well. That, too, is a missed opportunity.

As Ellie Buteau, vice president of research at the CEP and an author of the report, told me by phone: Foundations are in a unique position to develop knowledge and information about how to address very difficult social problems. They can help the nonprofit sector and government understand what is and what isn’t working very well.”

Consider, as a hypothetical example, the goal of helping students from low-income families to finish high school or attend college. Dozens of foundations, big and small, work toward that end, including  The Bill and Melinda Gates Foundation (“We aim to ensure that all US students graduate from high school prepared to do college level work”), the Jack Kent Cooke Foundation with its Young Scholars Program, the Annie E. Casey Foundation with its Learn and Earn to Achieve Potential Initiative, The Walton Family Foundation with its backing for charter schools and The Charles Stewart Mott Foundation with its support for afterschool programs. So what works? The after school programs? Parental involvement? Smaller classes? Smaller schools? Better-trained teachers? Financial inducements? School choice?

To be sure, some of these foundations try to share what they learn. Imagine, though, if they all embraced rigorous evaluations and talked openly about their successes and failures, so that more dollars could flow to the programs and nonprofits that do the most good at the least cost.

Given the limited resources in the nonprofit sector, the relative scarcity of information about impact is scandalous.

Why, then, are foundations are loathe to share what they know? Surely they mean well. The CEP researchers can only speculate, but they raise three possibilities.

First, foundations can’t share what they don’t know. Some may be blissfully ignorant about whether their grants are actually doing any good. Oops!

Second, and this seems the most likely explanation to me, is the challenge of measuring impact. The CEP researchers write:

Assessment is exceedingly difficult, and foundations may not be devoting the necessary resources to understand success, failure, and lessons learned. Even among large foundations, many have no evaluation function or allocate limited resources to judging performance.

Finally, foundation executives may have the information but decline to share it because they’re afraid of admitting failure or damaging their reputations or careers. Let’s hope that’s not the case.

Transparency is achievable, the CEP report shows, through case studies of a couple of foundations that excel in that regard–the Baptist Healing Trust of Nashville, TN, and the Central New York Community Foundation in Syracuse, NY. (Although even the Baptist Healing Trust doesn’t share much about programs that fall short of expectations.) The CEP study also includes an interview with the leader of a foundation that is so secretive that it refused to be named. It has no website and staff members do not disclose their employer when they attend meetings.

The CEP study was supported by the Fund for Shared Insight, a collaboration among eight foundations that, to their credit, want to promote openness and learning in the sector. Fay Twersky, co-chair of the fund and director of the effective philanthropy group at the William and Flora Hewlett Foundation, says foundations, which enjoy tax-exempt status, have an obligation to the public to explain what they do.

She told The  Chronicle of Philanthropy:  “We have the privilege of being able to give away charitable dollars that benefit the common good. There’s a moral imperative to be more open than the minimum legal requirement.”

If only more foundation executives felt that way.

4 thoughts on “When foundations are uncharitable

  1. Marc,

    Your “When Foundations are Uncharitable” story is spot on.

    The bothersome CEP report results you shared are still compelling to veterans like me who remain passionate about effective philanthropy and are working to improve that status quo in terms of verifiable results.

    It’s frustrating there is still a lack of systemic outcome innovation across the foundation world today, especially when such improved means for achieving greater impacts for the world have been well-proven for decades and are operational by a minority of higher-performing “early adopters”.

    The intransigence of mainstream foundations to improve their outcome performance (yes, even to a point of having any they can point to) remains the norm and for a few reasons in my experience:

    1) the carrot of creating a better world in our lifetime isn’t a strong enough incentive for established careerists to improve what they do on a day to day basis
    2) well-intentioned and incredibly capable minds have yet to overcome the lack of direct feedback that is the third-party payer system of grant-making in driving impact ventures to scale
    3) There are no sticks… i.e. no entitled tax-free, charitable entity will lose its tax free status for poor or no performance in creating net-positive externalities for society, let alone scaling those results to significance in relation to the largesse they command.

    I’ve worked at all levels of social impact improvement. There are widely distributed and great potentials for many to step up and solve all the world’s problems quickly and affordably. We simply lack clarity of vision and belief in probabilities improving with an applied will to do it.

    What philanthropy could improve is by its own version of Elon Musk creating a bow wave of change to which all must respond. We need a lead performer willing to not only reveal the baselines of such poor status quo performance, but also to rapidly move them upward with sweeping scale, vigor and deliberate focus.

    My hope is that someone with enough swag will welcome such a visible role as bellwether of social impact performance improvements, instead of the insular usual suspects merely promoting their brands by more adjectival words, sexy sponsorships and abiding comfort in more studies decrying what’s wrong…

    We need more philanthropies to just “ready, fire! aim” with a focus on scaling net-positive impacts — the leading and the learning is in the doing… and by example.

    Like

  2. susan006 says:

    I just discovered Nonprofit Chronicles last night. I really enjoyed this article, and am interested in how nonprofits can be more transparent and impactful. I look forward to reading your future posts. Thank you.

    Like

  3. Good post Marc, Grantees seem to be on a treadmill to satisfy grantors, but untested ‘conventional wisdom’ rules rather than effectiveness. Stifles innovation, new, creative ideas and reaching the goals to which everyone says they are dedicated. Hardly different from venture capital going to past success rather than good ideas.

    Like

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