September 14, 2017 | Read Time: 7 minutes
When the corporate foundation at German engineering giant Siemens went looking for simple technologies that could help people in developing countries, it didn’t ask for grant applications. Instead, it used a hot new format for foundations: a prize competition.
The Empowering People Award, first given in 2012, announced its second round of prizes last year. The top winner, a group from India that developed a wristband for detecting hypothermia in infants, beat out roughly 800 other applicants to win about $53,000.
“Somehow you have to find those guys out there in places like Africa and Latin America, and it’s really tough to do that,” says Rolf Huber, managing director of the foundation. “The prize was a way for us to get coverage and attention so that we could identify some great solutions.”
Prize philanthropy has been growing in popularity for years, sometimes to the chagrin of nonprofits. The John D. and Catherine T. MacArthur Foundation’s $100 million prize competition, whose finalists and winner will be announced later this year, is capturing the most attention, but there are many others.
The contests replace the genteel grant-application process with what can be a freewheeling, winners-take-all spectacle. Nonprofits that hope to win contests need to identify measurements that show accomplishments and be ready to make a pitch in person, experts say.
When handled badly, contests can seem patronizing.
In 2015, the Council on Foundations invited nonprofit leaders to compete for cash at the organization’s annual meeting. Standing before grant makers, they were to share their plans for improving the economy. The idea was scrapped when critics argued that it would be humiliating for the charity leaders.
It was a rare instance of nonprofits shunning philanthropy, saying in essence, “We’re not dancing bears.” says William Schambra, a senior fellow at the Hudson Institute and a frequent critic of prizes.
Big Foundations Buy In
But the Council on Foundations debacle didn’t diminish the appeal of prize philanthropy for the nation’s biggest grant makers. In November, the Gordon and Betty Moore Foundation will announce its second round of winners in a contest that recognizes early-career scientist-inventors and is expected to award $34 million over 10 years.
The 100&Change competition, which will give a single prize to the individual or group with the best idea for tackling a major world problem, received nearly 1,900 entries.
“100&Change arose out of a concern that as we narrowed our focus, we were possibly not paying attention to ideas and inspirations that were arising from others,” says Julia Stasch, MacArthur’s president. “Maybe we’re not always the smartest people in the room.”
A Business Mind-Set
Philanthropy prizes and contests have surged thanks to a diverse group of devotees. Some, like MacArthur and Siemens, hope to unearth new ideas. Others believe nonprofits need to look more like for-profits.
Donald Summers, managing director at Altruist Partners, a consulting firm in Seattle, says charities should embrace Shark Tank-style competitions common in the technology arena. The Seattle chapter of Social Venture Partners, a donor network, offers one such contest: It has connected charities and social entrepreneurs with more than $2 million since 2011 through its SVP Fast Pitch competition.
“It’s a healthy thing to take the practices of venture-capital investors and apply them to the nonprofit sector,” Mr. Summers says. “Anyone who complains about it is part of the problem.”
Other champions of competitions argue that grant seekers typically get nothing more than a rejection letter, while contest participants build key relationships and learn from the process even if they don’t win.
The Rockefeller Foundation’s 100 Resilient Cities competition offers one such educational experience, says Kimberly Manno Reott, managing director of Context Partners, a design firm that helped create the contest and other philanthropic prizes.
More than 1,000 cities applied for the 100 slots. Winners have received a share of the $164 million Rockefeller has awarded to help urban areas respond to physical, social, and economic challenges.
Cities that applied twice sharply broadened their understanding of resilience by studying feedback from the judges and analyzing winning entries, Ms. Reott says. Initially, those cities saw resilience primarily as an infrastructure issue, but their second applications talked about more holistic concerns, such as meeting people’s basic needs and ensuring that a broad range of citizens are involved in decision making.
“Cities benefited from participating in the prize even if they didn’t win,” Ms. Reott says. “People think of resilience as having buildings that don’t fall down, but Rockefeller designed it much more broadly.”
At the New York Community Trust, a community foundation with $2.5 billion in assets, creating a prize to celebrate nonprofit management brought energy to an issue that was “a neglected child” within the foundation, says Pat Swann, a senior program officer.
The Nonprofit Excellence Awards, now in their 11th year, are managed by the trust, the Nonprofit Coordinating Committee of New York, and Philanthropy New York. The cash prizes are modest — the winner receives $30,000 — but in a typical year, more than 50 organizations in the New York City area apply, driven by the desire for recognition and the pro bono management consulting that all entrants received, Ms. Swann says. More than 200 people attend the event where the three finalists are announced.
“In my opinion, this competition is the most effective way of lifting up and illuminating for the sector at large that nonprofit management and infrastructure is important,” Ms. Swann says. “The fact that it’s a competition stirs a little buzz in a way that a grant alone could never do.”
Wrong Focus
When contests go awry, it’s often because they’re too focused on finding the shiny new thing.
In 2013, the St. Paul Foundation launched the Forever Saint Paul Challenge, a $1 million prize for the community member with the top idea for improving the city. The foundation narrowed the entries to three finalists, and local residents selected the winner: Urban Oasis, a center that would promote locally produced food.
Last fall, after burning through the grant funds, the center announced that it couldn’t find a “sustainable financial model” and would soon shut down. A report by the St. Paul Foundation concluded the grant maker had focused “on innovative ideas rather than implementation” in its initial call for proposals.
Jon Pratt, executive director of the Minnesota Council of Nonprofits, says the foundation “was looking for the flashiest idea, but there wasn’t any vetting. Did the people proposing the idea have the capabilities to carry it out? What were their qualifications?”
Mr. Schambra says a far bigger problem with contests is that charities often contort their programs to fit the particulars of the prize.
“They repackage what they’re doing in fancy language to make it look new and groundbreaking, and they spend a lot of time reconceptualizing what they’re doing, for nothing,” he says. “The amount of wasted energy on the part of people whose hopes were raised is probably disproportionate to the benefit that the foundation gets from making the award to one winner.”
More Substance
Foundations running contests say they are trying to make them more meaningful for entrants. The Siemens Foundation is providing online workshops and hands-on training to the 25 winners in last year’s Empowering People contest. These entries also were added to an online database that other grant makers can search by issue area.
MacArthur’s 100&Change competition will provide feedback, including comments from the judges, to all its entrants, says Ms. Stasch. Ten semifinalists will receive expert help in financial planning and tactics to get people involved in their causes.
The foundation also intends to create a “marketing portfolio” to assist other grant makers interested in the ideas submitted to the contest. MacArthur has already received requests to share 100&Change proposals.
Says Ms. Stasch: “We take it as a serious responsibility to make this set of assets much more broadly available.”
