Will the Boom in Foundations Matter?

As the Council on Foundations begins its annual meeting this week in Los Angeles, the focus will be on how much the philanthropic world is changing.

Foundations are more numerous and wealthier than ever. More new grant makers than ever before are joining the scene, and many of them are relatively young and not cut from traditional molds. The political and legal challenges that threatened foundation activity in the 1960’s and 1970’s are more a distant memory than an imminent threat. The much-discussed intergenerational transfer of wealth — and the much less-discussed but potentially more important globalization of wealth — hold promise of even more bountiful times ahead.

Yet this new era also brings new dangers, which will require grant makers to ask some fundamental questions, not just about their procedures, techniques, and ethics, but about what they can realistically accomplish. Otherwise, the philanthropic boom might come — and leave little to show for itself.

A sense that the well-established modes of grant making are on their way out is already in the air. Describing the focus of its meeting, the promotional materials for the Council on Foundations conference acknowledge that “it is at moments of great change that the deepest questions arise.” And in a new book, The Insider’s Guide to Grantmaking: How Foundations Find, Fund, and Manage Effective Programs (Jossey-Bass), Joel J. Orosz, a senior program officer at the W.K. Kellogg Foundation, predicts that “foundations will need to do a far better job than they have in the past of identifying best practices in grant making, training new professionals in these practices, and insisting on ‘obedience to the unenforceable’ in ethical standards.”

Such statements are a clear reaction to the signals being sent by the newly wealthy, especially the technology entrepreneurs who have kept it no secret that they have many doubts about how well foundations work. One sign of their discontent can be seen in the growing popularity of investment-house “gift funds” and other giving approaches that allow donors much the same discretion over their donations that they would have if they had created a foundation — but to avoid the bureaucracy, timidity, and ineffectiveness they have seen in foundations.

One way veterans in philanthropy could help the newly wealthy overcome their doubts would be to talk candidly about what foundations have actually accomplished. Unfortunately, they will find relatively few recent examples worth touting. Mr. Orosz’s book, for example, contains a good deal of sage advice about how to be a foundation program officer, but far fewer examples of successful programs (or evidence that good staffing produces good grants). Many of the accomplishments he does cite (along with those on the “great grants” list found on the Council on Foundations Web site) are becoming hoary with age. Furthermore, except in a few notable instances, the grant-making world has been loath to acknowledge failures, let alone identify the lessons that might be learned from them.

Judging what works and what doesn’t is not always easy. But foundations have been investing increasing amounts to evaluate their programs. Greater forthrightness about their discoveries should help make clear what new directions philanthropy needs to consider.

One conclusion of those studies is that foundations need to be more open to a wider range of ideas. Last month the Thomas B. Fordham Foundation, in Washington, released a report concluding that the Annenberg Foundation’s commitment of $500-million to promote public-school reform had left only “small footprints” in the three cities — Philadelphia, New York, and Chicago — it examined. The reason: the foundation’s vision of how to fix school systems — to give them greater access to outside experts and consultants — was too conventional and naive. Indeed, as Vartan Gregorian, president of the Carnegie Corporation and adviser to the Annenberg project, now admits, a “miracle” would have been necessary for the foundation’s efforts to make a big difference, given the size of the school districts in which it was operating.

Fordham Foundation President Chester E. Finn Jr. suggests that the Annenberg money might have accomplished more had it embraced other approaches to school reform, such as letting parents choose which schools they want their kids to attend, offering vouchers to allow youngsters to attend private schools, or promoting more rigorous academic standards. But those (and similar market-oriented or performance-driven ideas in other fields) have had only limited appeal in the foundation world.

The resistance to an idea that is so popular outside of philanthropy is striking, and may help us understand why so many of today’s newly wealthy donors are steering clear of organized philanthropy. That resistance to market-oriented proposals may stem from the background and training of foundation staffs, who have, over the years, increasingly come to dominate grant making, at least at the larger foundations. Indeed, writes Mr. Orosz, “the quality of any foundation’s work, and the amount of positive change that it can effect in the world, is directly dependent on the capability of its employees,” its program officers. However, the rising generation of philanthropists seems inclined to challenge that notion.

There are already signs that many of the technology entrepreneurs starting foundations are deliberately trying to keep the size of their staffs small, and they are hiring people with values and backgrounds different from program officers at many of the nation’s established foundations. Instead of experience in the non-profit and academic worlds, foundation employees will be more likely to have had careers in business (or at least a business-like outlook). And perhaps most important, if their words are to be taken seriously, donors themselves will be playing a more direct role in grant making than they recently have.

In most fields, professionalism makes for a better organization. But as Mr. Orosz notes, there’s no single path to becoming a philanthropic professional. If so, with vast new fortunes to be distributed, does it matter where — or even if — donors seek assistance?

The answer to that question depends in part on what grant makers aim to do. Succeeding in the coming philanthropic era will require not just learning from the past, being open to new ideas, and hiring employees who can really help, but also having a realistic understanding of one’s goals.

What is it foundations — even super-wealthy ones — can really hope to accomplish? With coffers overflowing, great aspirations will be hard to avoid. But new money, technology, people, and techniques may still be insufficient to deal with this country’s most deep-seated problems, let alone those of the rest of the world. And committing funds in pursuit of a futile objective may be worse than doing nothing at all.

As the editor Irving Kristol told a Council on Foundations meeting two decades ago, philanthropy’s great temptation is hubris, the sin of pride, which leads to regarding no feat as beyond the grasp, no task as too daunting. With the philanthropic boom already beginning, recognizing the limits of what foundations can do may be the most urgent and important challenge of all.

Leslie Lenkowsky is professor of philanthropic studies and public policy at the Indiana University Center on Philanthropy and a regular contributor to these pages. His e-mail address is llenkows@iupui.edu.