Foundations Urged to Collaborate and Find New Ways to Solve Problems

Foundations must collaborate to find

new ways to deal with challenges around the globe, speakers at the annual conference of the Council on Foundations warned the more than 2,000 people gathered here.

In a speech on the conference’s opening day, Mark Warner, the former governor of Virginia, criticized foundations for their reluctance to collaborate on projects that could have a national impact, and urged them to drop their sometimes “holier than thou” attitude toward working with politicians.

“It’s a lot easier to get Democrats and Republicans to agree together than it is to get foundation staff to work together and collaborate on a major scale,” said Mr. Warner, who was considered a strong contender for the 2008 Democratic presidential nomination before he withdrew his name last fall.

Mr. Warner — who made his fortune as a telecommunications entrepreneur and helped to create a major “venture philanthropy” group in Washington — also urged foundations to prepare for an acceleration of technological change and the “new wealth” it will generate, which could increase tensions between traditional philanthropy and new, more entrepreneurial styles of giving.

“If you think the last 10 years have been wild, you haven’t seen anything yet,” he said.

Mr. Warner said he discovered the “not invented here” approach of many foundations when, as head of the National Governors Association in 2004 and 2005, he won support from more than 40 governors for an effort to improve the nation’s high schools.

The project attracted seven or eight foundations that contributed about $50-million, but it should have drawn dozens of foundations and hundreds of millions of dollars, he said.

“The bureaucracy, the unwillingness to collaborate, the unwillingness to partner, the sense that, No, we want to do our own stand-alone special project or demonstration grant as opposed to taking a good model and trying to take it to scale, I think is an issue that you as a community need to continue to wrestle with,” he said.

Mr. Warner also urged foundations to shed any reluctance they might have to “get their hands messy” by mixing with politicians. “If we are really going to make meaningful, significant, long-term substantive change, you’ve got to deal with the policy world,” he said.

He said foundations can help policy makers who are trying to make meaningful changes, in part because foundations have the freedom to be more innovative than government.

“You can help provide that funding for that idea that potentially is too hot politically for funding to start with,” he said. “But if you prove it out, then we can show how we can take it to scale at a public level.”

The changes facing philanthropy were much on the mind of many of the grant makers here.

Welcoming participants to the conference, Maxwell King, president of the Heinz Endowments in Pittsburgh and chairman of the Council on Foundations, predicted that the key challenge for foundations in coming years will be to maintain their sense of ethics while they also try to make their organizations more effective.

Lawmakers and the news media will be watching how effectively foundations are spending their money, Mr. King said, and grant makers must respond in a way that does not tempt federal or state governments to add excessive regulations. “It is going to be our job to manage those pressures thoughtfully and skillfully so that the process benefits philanthropy and does not result in such regulation or bureaucratic constraint that it kills the spirit of our movement,” he said.

Despite being the largest philanthropy in the United States, the Bill & Melinda Gates Foundation must work in tandem with governments, businesses, and other foundations to solve the demanding social problems the world faces, Melinda Gates told the gathering. “Yes, we have a lot of resources, but it is a drop in the bucket compared to the goals that we have and where we’re trying to go,” she said.

For example, if the Gates fund were to pour its entire assets into supporting public education, it would not cover the operating costs of the California school system for one year, she explained.

Given that disparity, the foundation needs to work with others, she said. For example, the foundation’s work in education has evolved as its leaders have learned about obstacles that “squelch reform,” Ms. Gates said. Today the foundation seeks opinions from more people involved in education, including people who run local schools and policy makers. Such lessons regarding collaboration are among those that have been “hammered home” most significantly to the foundation, she said.

“If we’re going to have a global impact and do it over the long haul, then governments and businesses have to be involved. They are central to everything that we do as a foundation,” she said. Ms. Gates also said that her fund will continue to form partnerships with other foundations.

She noted that the foundation has also taken steps to work with drug companies as it seeks to fight disease in developing countries. During a recent trip to Vietnam, where the foundation is working to introduce a new vaccine for rotavirus, a disease that causes severe diarrhea, she and Mr. Gates found that the small refrigerators there were unable to store the vaccine, which comes in bulky packages.

That discovery prompted the foundation to put pressure on the company developing the vaccine to create a smaller package for the product. Ms. Gates said such trips have served as a “dramatic reminder” to keep the concerns of the people in need at the forefront of the foundation’s work.

Despite the challenges that the Gates Foundation and other grant makers face, Ms. Gates emphasized the importance of doing tough work, and said the list of lessons she and Mr. Gates have learned from their experiences is just as long as their list of mistakes.

To illustrate her point, Ms. Gates told a family story. A few years ago, while watching her 3-year-old daughter struggle to tie her shoes, Ms. Gates overheard the child mutter under her breath, “This is so difficult. But I like difficult.”

For foundation officials trying to improve the world, “it will be difficult,” she said. “But I am hopeful because I think we all in this room like difficult.”

Big changes in the news-media landscape, including the waning influence of traditional journalistic outlets and the growth of alternative information sources such as blogs, will affect the way philanthropic organizations get news about the issues they care about, according to experts who discussed the issue at a session here. But some were more optimistic than others about what that means.

“Newspapers are getting dumbed down, getting more shallow, less substantive; newsrooms are getting cut back, news holes in the newspapers are getting smaller,” said Mr. King, who was editor of the Philadelphia Inquirer before he took over the Heinz Endowments. “The old economic model of news gathering is broken.”

Mr. King said he worries that such changes will deprive foundations both of substantive reporting about ways to improve society and of journalistic checks on their effectiveness.

But Arianna Huffington, an author and founder of the Huffington Post, a political blog, said there’s not that much to regret. Traditional news coverage, she said, suffers from “attention deficit disorder,” focusing intensely on a story for awhile, then abandoning it. She said new technology “offers the possibility of introducing giving and volunteering into our lives in a consistent way.” Blogs can provide long-term, “obsessive” coverage of a disaster or social issue, while donors can follow the progress of an issue, or a person who needs help, online.

Philanthropic efforts to fight poverty in the United States need a significant rethinking, speakers here told grant makers.

William Schambra, director of the Bradley Center for Philanthropy and Civic Renewal at the Hudson Institute, in Washington, said foundations too often focus on fighting the “root cause” of poverty, he said, prompting grant-proposal writers to tailor their ideas to the “root cause du jour,” when in fact many things — not one cause — contribute to poverty.

Both the Rev. Larry Snyder, president of Catholic Charities USA, in Alexandria, Va., and Bruce Katz, vice president of the Brookings Institution, in Washington, said foundation efforts should take into account the realities facing those in poverty in America today. Father Snyder called for a response to the need for what he dubbed “financial literacy” among the poor, and said 25 percent of Americans could not subsist for longer than two months without a paycheck.

Mr. Katz urged grant makers to recognize that more people in poverty live in suburbs than in cities and suggested that foundations find ways to make sure that their poverty-fighting efforts take into account the need to create more decent-paying jobs and train people to fill them. Too often, he said, grant makers have separate programs focusing on poverty and job training. “If you work, you should not be poor,” he said.

Wade Horn, former assistant secretary for children and families in the Department of Health and Human Services, urged foundations to explore ways to provide services such as education and job training to people after they leave the welfare rolls.

He said efforts to overhaul the nation’s welfare system over the last 15 years have been a “modest success.” But, he added, “we ought not throw wild parties every time we move someone off of cash welfare into the ranks of the working poor.”

Mr. Wade, now a director at Deloitte Consulting, in Washington, said the federal government had paid for a series of experiments over the last eight or nine years to find out what kind of services would help former welfare recipients keep and advance in their jobs — but they had shown little or no impact.

Foundations have the flexibility to be more inventive, he said. “What foundations can do is fund creative new programs designed to attack this problem without fear that if you get a negative result, suddenly Congress is going to stop giving you money.”

Foundations are increasingly focusing on how their investment policies mesh with their missions — in part because of pressure from trustees and also because of increased news attention to the issue of whether grant-making policies jibe with the stock holdings in an endowment’s portfolio, speakers here said.

Joseph Lumarda, senior vice president of the Capital Guardian Group, an investment-management company in Los Angeles, said it has been in the past 10 years that the occasional new person on a foundation investment committee has raised a flag to question two issues: which firm the foundation has selected to manage its assets, and how the foundation has decided to invest its endowment. Today, more people are raising questions about where the money is invested, he says.

Robert Friedman, founder of Corporation for Enterprise Development, a Washington group that develops policies to fight poverty, told grant makers that it is the responsibility of trustees to use all of the assets of the foundation for its mission, and not just the sum distributed in the form of grants and program-related investments.

Mr. Friedman said it no longer makes sense for foundations to worry that social investments will fare less well than other types of investments. “We may be doing more harm in the investment portfolio than good we are doing in the grant-making portfolio,” he added.

Foundations must also seek ways to be sure their investments are managing by a diverse range of financial experts, speakers here said. But if a foundation decided to turn to a minority-owned financial management firm, said Mary Pugh, president of Pugh Capital Management, in Seattle, they face the reality that just 7 percent of the 8,600 investment advisory firms in the country are owned by minorities or women.

John Morning, who owns a graphic-design company and is a trustee at the Rockefeller Brothers Fund, in New York, said he worried that foundations wouldn’t do much to diversify who manages their holdings unless more minorities served on their boards. “It’s almost an impossible task,” Mr. Morning said.

Videos of the keynote speakers conference are available on the council’s Web site.