To Avoid Wasting Money, Foundations Need to Confront Failures

Foundations often loudly trumpet their successes. But they would be more effective organizations if they would quietly learn from their failures.

While mistakes happen for many reasons, a review of foundation history provides three major ways in which philanthropists waste grants or make matters worse than before money was awarded.

Impossible aims. Many philanthropists assume that spending large sums of money will enable recipients to act in ways a donor would prefer. J. Roderick (Rod) MacArthur, for example, believed that if he gave enough money to “geniuses” that the recipients would solve the world’s social problems. The MacArthur Fellows Program, Rod MacArthur told The New York Times in 1981, “is probably the best reflection of the rugged individualism exemplified by my father—the risky betting on individual explorers while everyone else is playing it safe on another track.”

“There was no management association looking at Michelangelo and asking him to fill out yearly forms in triplicate,” Rod MacArthur told Newsweek in 1979. “Our aim is to support individual genius and free those people from the bureaucratic pettiness of academe.”

But more often than not, a MacArthur recipient today is a tenured professor, often in an endowed position, who probably uses the grant to fatten his or her retirement account. Only six of the 22 people awarded MacArthur fellowships last year were independent scholars with fluctuating incomes. Two other fellows—the architect Jeanne Gang and the silversmith Ubaldo Vitali—headed companies they created, while fellow Francisco Núñez is the head of the Young People’s Chorus of New York City. The 12 professors who received grants—seven full professors, two associate professors, and three assistant professors—outnumbered them. Two of the professors—Roland Fryer of the University of California at Berkeley and Kevin Guskiewicz of the University of North Carolina at Chapel Hill—hold endowed positions. Three of the 12 faculty members teach at Harvard.

Eliminating possible outcomes. The road to philanthropic failure often begins when a foundation eliminates reasonable alternatives to a desired goal. Consider the differences between the first and second Carnegie commissions on public television.

The 1967 Carnegie Commission on Educational Television was one of the most influential commissions in the history of philanthropy. Nearly all the recommendations of this commission were adopted, including the creation of the Corporation for Public Broadcasting as a quasi-governmental organization that would be largely paid for by government but would be exempt from civil-service rules. All the quasi-governmental organizations that followed, including Amtrak and AmeriCorps, derive from the Carnegie Commission’s innovative idea. Even the name “public television” was created by the commission to supersede what used to be called “educational broadcasting.”

But public broadcasting stagnated in the 1970s; money shortages were common, and the best shows on PBS were, more often than not, British imports. So in 1977, Carnegie created a second commission to study public television, with a second report issued in early 1979.

What happened between the two commissions, however, was that cable television was created. In 1978, 18 percent of American homes had cable TV, a percentage that was steadily rising.

The second Carnegie commission assumed that cable networks would never compete with PBS. The commissioners said cable channels would never produce programs “without a constant and chilling eye on the bottom line.” Among the programs the commission said were “unappealing for commercial network distribution” were “original American drama, documentaries, and programming in science and the arts.”

Today, of course, far more Americans watch science, nature, and historical documentaries on the Discovery, History, and National Geographic channels than they do on PBS.

The cable networks also created C-Span, a channel that Kenneth Tomlinson, chairman of the Corporation for Public Broadcasting, told The New Yorker in 2004 “in many ways” fulfilled “the original intent of the founders of public broadcasting.”

Arrogant executives. When McGeorge Bundy became president of the Ford Foundation in 1966, he swiftly transformed the foundation from a staid and safe foundation into a crusading engine of New Frontier liberalism. Like General Patton’s Third Division, the Ford Foundation would march in only one direction: forward.

Irwin Ross, a writer at Fortune magazine, captured Mr. Bundy’s straight-ahead style in a 1968 profile in which he observed a staff meeting where Mr. Bundy cut off some droner by saying, “Look, I’m settled about this. Let’s not talk about this anymore. I may be wrong, but I’m never in doubt.”

Mr. Bundy’s management style was disastrous. His efforts to decentralize the New York City schools led to three citywide teacher strikes and set back the cause of school choice for a generation. The Washington Post reporters Laurence Stern and Richard Harwood observed in a lengthy investigative piece that many foundation executives blamed Mr. Bundy’s arrogance for precipitating the tumultuous Congressional hearings that led to the Tax Reform Act of 1969.

Mr. Stern and Mr. Harwood reported that after Mr. Bundy testified before the House Ways and Means Committee, Rep. Martha Griffiths, Democrat of Michigan, said she believed that “to Bundy, Congressmen were simply another species of fool.”

“Some fellow philanthropists,” told the reporters that Mr. Bundy’s testimony “was a personal Bay of Pigs.”

Mr. Bundy survived as Ford Foundation president for 10 years after the 1969 Congressional debates. But he minimized his presence. Ever since then, Ford has been a self-effacing large foundation that tries to act as if it is a small one.

Foundation CEO’s must understand two rules if they are to avoid pushing their foundations into programs that could prove catastrophic. The first is to realize that large programs will not inevitably result in massive social change. Big programs work when they push toward a goal that is objectively verifiable and measurable. (Either a new vaccine prevents disease or it doesn’t.) But big grants will not necessarily lead to big changes.

“There is a common fallacy—and some foundation officials may not be immune from it—that money can create ideas, and more money can create better ideas,” Raymond Fosdick, the longtime Rockefeller Foundation president wrote in his autobiography. “Nothing can be wider of the mark. You cannot buy scientists or poets as you would buy vegetables in a cash-and-carry store.”

Foundations can prevent arrogance by becoming humble organizations that recognize the limits of their power. Humble foundations know that small local grants are often better than large national ones. A donor who wishes to change the lives of more than a thousand people with a single grant—more than, say, a school or a hospital—ought to question what he or she is doing. Foundations should rediscover the virtues of low profiles and realize that the least successful nonprofits are often those with the largest communications offices.

Humility is a virtue, and pride is a sin. If more foundation presidents recognized this, they would be less arrogant and more effective leaders.