Report on Grantees Ignites Debate

To the Editor:

A better title for Debra Blum’s “Grant Seekers Say They Value Foundation Expertise” (April 29) would be “Pointing Out the Obvious.”

The same can be said for the article’s primary focus, a new study from the Center for Effective Philanthropy that concluded that nonprofit organizations prefer to interact with foundations that are congenial, have clear goals, and know the fields and communities in which they make grants. Did anyone at the center think nonprofits would prefer working with foundations that are nasty, incoherent, and clueless?

Of most concern in Ms. Blum’s article and the center’s report is the statement by the center’s executive director, Phil Buchanan, that “We’ve punctured some myths here. What grantees value most in funders is not about money, but about the quality of interactions, clarity of communication, and expertise of the foundation.”

More specifically, the Center for Effective Philanthropy study finds that nonprofit organizations do not care much about the size of grants they receive from foundations or whether they get general operating or program specific support. And two of the report’s “key conclusions” are to “make…necessary investments in [foundation] administrative expenses” and for foundations to “seek out comparative, confidential grantee perspectives.”

I would urge anyone who reads this article or the report to be aware of a few factors before accepting its conclusions at face value.

First, the center did not ask nonprofit organizations what kind of foundation support they need to best serve and represent their constituencies and communities. Instead, it merely asked about “the key attributes of a successful and satisfying foundation-grantee relationship.” It is completely misleading to use results of this study about foundation-grantee relationships to make statements that suggest nonprofits do not have a strong opinion about the amounts and kind of money they need from foundations to do their jobs effectively.

Second, more than a few members of the center’s Advisory Board and major current funders were strongly opposed to the provision in last summer’s bill in the House of Representatives, HR 7, which called for removing foundation administrative and operating costs from their annual payout calculations. Considering who the center’s advisers and funders are, the report’s conclusion that foundations need to spend more on their administrative and operating costs is more than a bit suspect — not to mention convenient, should Congress again try to touch that “third rail” of philanthropic public policy, the 5-percent payout rate.

Third, the center’s study concludes that foundations should do more to find out what their grantees think about them, and recommends using comparative and confidential grantee surveys to do so. Once again, convenience rules the day. The center’s Web site advertises that it can provide foundations with comparative and confidential surveys of their grantees — for a cost. Sounds like a win-win situation, with the center earning some revenue and foundations able to hire the center to do this work and, most likely, write it off as a grant expense.

The latest from the Center for Effective Philanthropy does nothing to advance understanding about what the nonprofit sector needs in order to function effectively — especially that part of the sector that strives to serve and represent those communities and people most in need. It does, however, nicely help advance the political goals of those who believe that nonprofits need foundation expertise more than foundation money.

Maybe next time the center can reach an intellectually defensible conclusion about what nonprofits want and need from foundations by asking the questions honestly and appropriately.

Jeff Krehely
Deputy Director
National Committee
for Responsive Philanthropy
Washington

To the Editor:

At last, light has been shed on a subject that previously received only heat: overhead spending by charitable foundations. The Center for Effective Philanthropy’s new report provides a bracing dose of common sense on this volatile subject, distilled from a written survey of nearly 3,200 charities that received grants from at least one of the 30 largest foundations in the United States. Grant seekers and grantees want their foundations to be, as one survey respondent said, “expertly run by professional and caring staff.” It turns out that it is more important to grant seekers and grantees that they be treated fairly by knowledgeable staff than anything else, even more important than the size and the type of grants they receive.

So how can foundations build expert, professional, and effective staffs? Only by making investments in selecting and training excellent program officers — after all, universities do not offer “pre-grantmaking” courses — can foundations create the kind of staffs that really help a charity to fulfill its mission. And searching for, then educating, top-flight staff costs money. Specifically, it costs overhead money.

Here is where light streams into the heated overhead debate. Some foundation critics have presented overhead as “evil” (and to be sure, some forms of overhead, like excessive compensation or the creation of opulent headquarters buildings, are indefensible). But not all overhead is created equal. To equate money spent in such abusive ways with money spent to educate program officers to better serve grant seekers and grantees simply defies common sense. The respondents in the center’s survey understand this perfectly: some kinds of overhead make foundations better.

It would be a disaster for charities if efforts to root out the indefensible forms of overhead spending result in limitations on all overhead spending. For example, if severe restrictions were placed upon the total overhead spending of a foundation, it would be much easier for the foundation to cut expenditures to educate their program officers than to stop paying their rent. And, in such a case, it would be the foundation’s grant seekers and grantees who would be the big losers.

Let us hope that policy makers will do what the Center for Effective Philanthropy did — listen to grantees — and recognize that overhead costs spent on continuing professional education for program officers improves philanthropy for everyone. Properly understood, overhead funds spent on education are really investments that will pay dividends for the common good.

Joel J. Orosz
Professor of Philanthropic Studies
and Director of the Grantmaking School
Dorothy A. Johnson
Center for Philanthropy and Nonprofit Leadership
Grand Valley State University
Grand Rapids, Mich.

To the Editor:

I want to clarify several points discussed in your coverage of the Center for Effective Philanthropy’s latest report, “Listening to Grantees: What Nonprofits Value in their Foundation Funders.” The article accurately describes our finding from large-scale surveys of grantees that three factors best predict grantee ratings of individual foundations. Those three factors — quality of interactions, clarity of communications of goals and strategy, and external orientation and expertise — are more powerful predictors of grantees’ overall perceptions of a foundation than the type, or even size, of any grant received.

However, this finding should not be taken to mean that grantees do not prefer to receive operating support over program support, because our data suggest that they do. Nor should readers of The Chronicle conclude, as I fear they might based only on the article, that our report argues that a foundation’s choice of what type of support to provide is unimportant.

What our analysis shows is simply that the three dimensions we identify are more powerful predictors of grantee perceptions. Put another way, we have identified certain basics that are required in order for foundations to have comparatively strong relationships with grantees, regardless of other choices the foundation may make.

Phil Buchanan
Executive Director
Center for Effective Philanthropy
Cambridge, Mass.