Where Small Foundations Can Learn the Ropes

By CONSTANCE CASEY

At age 70, Ike Leighty found he had more money than he could give in his usual way to charities in his hometown of Waterloo, Iowa, or his birthplace of Macomb, Ill. After being laid off by a company he’d been with for 30 years, he started a business that became extraordinarily successful.

After selling the company, which made plastic gauges, to his employees, he found himself a multimillionaire — and decided to set up a charitable foundation where he could put his extra cash until he decided precisely what he wanted to do with it.

“At first my son said, ‘There’s so much need out there. Why not just give it all away to the Salvation Army?,’ ” recalls Mr. Leighty. “But I don’t think the Lord intended us to just dump it. I think he wanted us to get involved.”

Mr. Leighty’s son and daughter became his co-directors on the foundation’s board; his daughter also serves as the executive director. Now, at 84, Mr. Leighty and his family run a foundation with assets worth more than $7-million. He believes he has made the transition from businessman to philanthropist pretty successfully, but says he had a lot to learn along the way.

One way Mr. Leighty got help in that learning process was to join the Association of Small Foundations, which two veteran non-profit executives for environmental groups, Joe Pierpont and Charles Scott, got off the ground in 1996. When Mr. Leighty joined, the association had 96 members; it now has 2,200 — 320 more than the Council on Foundations, which represents most of the nation’s largest grant makers.

The Association of Small Foundations isn’t likely to have to worry about being small itself. The number of foundations that are potential members continues to soar. Since 1980 the number of active foundations has more than doubled to more than 45,000. The vast majority of the new foundations, like the Leighty Foundation, have no professional staff members — and it is those organizations that the association seeks to serve.

“It was clear to me that even though the members of the Council on Foundations represented 50 percent of all giving, the council didn’t represent more than a tiny percent of the foundations,” Mr. Pierpont says, “and the needs of those with few or no staff were totally different.” Not only were their needs different, Mr. Pierpont says, but so too was the scope of their influence. “A foundation in a small town in Oklahoma or New Jersey with $10-million, making grants to the local hospital or library, is often the largest frog in that pond,” Mr. Pierpont says. “They’ll be bigger in their impact there than Rockefeller is in the worldwide pond. And there’s more accountability because the trustees drive past the hospital; their grandchild was born there. They use the library.”

Together, the 2,200 members of the association represent combined assets of $35-billion — about the same amount as is controlled by the nation’s two wealthiest philanthropies, the Bill & Melinda Gates Foundation and the Ford Foundation. A quarter of the association’s members have assets of $1-million or less. The majority are in the $1-million to $20-million range; 160 hold assets over $50-million.

“For the most part these are the people you read about in The Millionaire Next Door,” says Mr. Scott, the association’s co-founder. “They drive the same truck they’ve had for the last 15 years. They don’t think of themselves as wealthy.”

While the trustees of small foundations may be very prominent in their own communities, they often get pretty lonely. “If you work for the Ford Foundation and are having trouble putting your grants budget together for the year, you walk down the hall and talk to someone with more experience,” Mr. Pierpont says. “If you’re sitting in your den, there’s no one to walk down the hall to. But there are people out there just like you. And for the most part those people would be delighted to share their information.”

Even when the executive director is a paid professional with philanthropy experience, he or she can feel isolated.

As sole staff member of the VNA Foundation, in Chicago, Robert DiLeonardi makes decisions about how best to use the foundation’s $40-million. In the case of his foundation, which is affiliated with the Visiting Nurses’ Association, the money supports health care for the poor in Chicago.

“I tell people Yes, sure, I’m an executive director, but I direct a staff of one,” Mr. DiLeonardi says. Though he consults with a board of directors, he runs the foundation office with one clerical helper and describes himself as in charge of coffee making and reception as well as distributing some $2-million a year.

Mr. DiLeonardi, now chair of the Association of Small Foundations, remembers feeling out of place at Council on Foundations meetings. “You’d sit down to lunch and the people from the large foundations would be talking about programs,” he says, “whereas we all had a sense we were doing 30 things at once and were just hoping we were doing them all OK.”

The Association of Small Foundations doesn’t rely solely on the help of volunteers like Mr. DiLeonardi. In the past two years, the association has acquired five staff members who work from its headquarters in Bethesda, Md., and Burlington, Vt. Mr. Pierpont enjoys pointing out that his association, with more members than the Council on Foundations, has a staff of seven, while the Council on Foundations has a staff of 110.

The association’s $1.2-million annual budget is supported by membership dues of $300 a year and also by foundation grants. The Surdna Foundation, for example, gave an initial grant of $30,000 and quickly increased it to $350,000 so the association could hire its first staff member. The Pew Charitable Trusts recently pitched in $300,000 over three years. In April the W.K. Kellogg Foundation announced a $250,000 grant to the association to prepare what it calls a Foundation in a Box. In an actual physical box, on a CD-ROM, and on the association’s Web site, the compilation will pull together answers to the questions that foundation managers ask most often.

Mr. Pierpont and Mr. Scott attribute their group’s rapid growth to a hunger for such basic information. One of the association’s oft-repeated slogans is that there’s no such thing as a dumb question.

“Someone would feel constrained at the big annual Council on Foundations meeting asking, ‘What is this 5 percent thing I’m supposed to be thinking about?’ ” Mr. Pierpont says, “and you could get in a lot of trouble if you didn’t know.” (Private foundations are legally required to give away on average at least 5 percent of their assets each year.)

Dorothy Ridings, president of the Council on Foundations, says the two groups are not in the least competitive. “I cannot tell you how grateful I am that they exist,” she says. “Given the explosion in the formation of new foundations, quite frankly, we would not be able to service them.”

Members of the Association of Small Foundations say that what they value most is the organization’s regional meetings and a colleague-to-colleague directory that makes it easy for foundation donors and trustees to get in touch with each other.

In addition, a quarterly newsletter offers nuts-and-bolts advice — what’s the best grants-administration software, how to advertise for an executive director, how to find health insurance for employees.

When Jane Justis, Mr. Leighty’s daughter, went to the association’s first meeting, there were only 12 people there. Though the numbers were small, she says she felt a sense of relief from getting in touch with others in the same situation. “What I like is that the association doesn’t say, Here’s what you should do. It hooks you up with people who have faced similar issues.”

“Almost everyone backs into philanthropy,” Ms. Justis adds. “You don’t go to college and sit in class and think to yourself, ‘I want to be a philanthropist.’ It’s a folklore business. You learn from other people’s stories.”

Some observers say the association may be catering too much to its members’ intense interest in complying with federal laws and administering their foundations — and contend that it has not done enough to get them to concentrate on what it takes to be an effective grant maker.

“Getting your infrastructure in place is an important beginning, but the association has a way to go in guiding its members to making a difference in the world,” says Leslie Lenkowsky, professor of public policy at the Indiana University Center on Philanthropy.

“They want to do good, but most of the advice they get about how to do good is legal and technical. At the end of the day, getting good legal advice and having good software doesn’t satisfy people who want to do good.”

Mr. Scott, the association’s co-director, agrees about the need to help foundations do a better job of grant making. He says the organization’s next step will be to connect people who are giving in similar fields so they can discuss ways to achieve the best possible effect with their grants. But it was important to start with the basics, he says. “The first thing we have to worry about is that every small foundation knows the details cold,” he says. “That frees them up to look at the bigger picture.”

Mr. Pierpont says a further step to find ways to get donors to small foundations more involved in educating policy makers. A recent survey of association members found that more than half of them report knowing their member of Congress personally. Mr. Pierpont hopes to encourage members to use their connections to educate legislators who might be preparing to vote on laws that could affect foundations. He suggests sending a list of grants with a note saying, “here are some of the things we’re doing in the community.” He adds, “The member of Congress doesn’t know this guy he knows from his home state has a foundation, and he may be preparing to make a decision on tax law because he’s mad at Ford or Rockefeller or MacArthur.” He says that if you put the heads of the 10 largest foundations in the country in a room with any 10 members of the Association of Small Foundations, “our people would know more members of Congress and the state legislature.”

In encouraging a higher profile, Mr. Pierpont may have his work cut out for him. The new foundation heads tend to be modest. Mr. Leighty is still not comfortable — especially in his home town — talking about how much money his foundation controls. His daughter has had annual reports printed up for him that don’t mention the foundation’s total assets.

As Ms. Justis explains: “When the source of the money is a family business, it still has your name attached to it. You wonder whether people are going to think you’re arrogant.”

Recently at a lunch meeting for donors, Mr. Leighty sat next to a young woman whose grandfather had died, leaving her $610-million in a foundation, with no direction. She was stunned and overwhelmed, he says, and he realized how grateful he was that he had the chance to grow more gradually into philanthropy and to get advice from a network of people facing similar challenges.

“In networking with other foundations, we’ve found a lot of them say, ‘what am I going to do with all this money?’ ” Mr. Leighty says. “Some of these people have got these millions, even billions, and it’s a chore.”