This blog was posted initially on the site of the Center for Effective Philanthropy.
Copies of my book can be ordered from McGill Queens University Press
What’s the story on foundations? A simple question, with surprisingly many answers.
A story is the way we interpret the meaning of actions and events. We tell stories about actions to make sense of intentions. Inevitably, stories are subjective and rooted in context. So, depending on context, the story told about foundations can be benign (foundations exist to help those in need) or conspiratorial (foundations are anti-democratic vehicles for the wealthy), critical (foundations wrongly sequester urgently needed resources for today’s problems) or aspirational (foundations are the risk capital for much-needed social innovation).
Can there be a single story? Probably not. Philanthropic foundations are as diverse as the sources and uses of their capital. But the compelling question for philanthropy in the 21st century is, do foundations still matter? Is there a convincing story to tell about that?
Endowed foundations as institutions can be traced back over a thousand years in Western societies. Philanthropic capital endowed in Islamic waqfs or Christian monasteries and churches permitted continuous charity, with funds dedicated in perpetuity for a charitable purpose. This is well-documented in Paul Vallely’s comprehensive 2020 history Philanthropy From Aristotle to Zuckerberg. It’s a model that has been developed over centuries. What has changed, of course is the understanding of charitable purpose, and the role of independently funded philanthropic institutions in a modern society.
Charity itself has not changed in meaning. At its most basic, the foundation story is about charity, caring for others. Most endowed foundations would claim that story. They are using their endowed funds to provide a stream of grants to operating nonprofits for community good. But this story alone is not sufficient to explain or to legitimate the role of foundations in 2022. Community needs are greater than ever, and the importance of equity as well as compassion is changing philanthropic priorities. Is the story only about charity, or should it also be about change?
Over close to two decades as leader of a national network for philanthropic foundations in Canada, I got to know many grantmaking and endowed foundations and their work. One of my goals in that role was to tell a convincing story about the reasons that foundations matter. There are many audiences for this story: policy and lawmakers, opinion leaders and influencers, advisors, donors, and foundations themselves. The audience is also increasingly the community. Community leaders are asking for a compelling rationale for the perpetual or continuous charitable foundation, at a time when justice and inclusion are as important as charity. How must the story itself change in this context?
Reflecting on my experience in a new book From Charity To Change, I have written about how the story is evolving away from foundations as charitable givers. In the early 2000s, when I started in my post, the new story about foundations was that they were social “investors”. According to this story, foundations, with their unrestricted funds and higher risk tolerance, play an important role as the “angel investors” of the nonprofit sector. Like early-stage business investors, they can take on risk and fund the development of good ideas and models for social change by supporting experimentation and demonstration pilots. But the angel investor model of philanthropy doesn’t capture how social change is made. Nor can it profit from the exit strategies available to private investors.
Another story popular in the early 2000s was that of the “strategic” foundation, sometimes called the “philanthrocapitalist” foundation. So-called strategic foundations were interested in bringing about social change, using models and theories to determine and measure specific social outcomes and impacts. This story suggested that foundations, somewhat like businesses, could be data-driven and efficient. But, as with the idea of the social investor, this approach was controlling. It did not open the way to more collaborative approaches, even if it was appealing for a foundation to run its own show. And it did not consider the great complexities of social change.
A recent and more widely popular story is that of the trusted partner or collaborator, in which a foundation works hand in hand with community partners to achieve mutually agreed goals. This is a more inclusive story that lends itself more readily to the idea that foundations play a role, together with others, in making changes which bring about a more socially just community.
Yet questions of power and inequality linger beneath all these stories. Foundations are privileged. Their endowments give them power. May would argue that the power is unfairly earned or used. Lack of transparency, closely held governance and conditional granting all give more weight to the negative generalized description of foundations as vehicles for dispensing charity, not contributing to the changes that might make charity less necessary.
In the end, generalizations never make for good stories. Foundations need to create better stories through their specific actions, not their words. These kinds of stories need details to stick in the mind. In my book, I use details to tell the story of twenty Canadian foundations. I chose to describe them by their actions: field makers, community capacity builders, power shifters, public policy strengtheners, convenors and connectors. These foundations represent themselves, not anyone else. And they can’t be pigeon-holed as investors, strategists, or innovators. They might be all three in fact. No one story fits them all. No generalization does them justice. But their stories add up to something. They’re not just a collection of separate anecdotes but a portrait that answers that question: why do foundations matter?
The diversity and breadth of their work shows us that in our social ecosystem, foundations contribute many important things: knowledge-building, social research and development, network creation and convening, organization and infrastructure support, influence, and advocacy. They act as signals to others around ideas and innovations that will matter not today but maybe five or ten years from today. These contributions can and even should be made with others. What differentiates the foundation contribution is its continuity over time and the ability to give with patience for outcomes that may only be realizable in the long term. Philanthropic investments in designing and testing new social programming, or support for policy development studies, or core support to build networks and develop leaders, can be maintained for several years to generate maximum social benefit.
Finally, foundations matter because they can change themselves. As organizations with a history and a future, they can evolve. They have adaptative capacity. All the foundations whose stories I tell are remarkable because they have learned and changed themselves as well as changing the world around them. Flexible, risk-tolerant, and long-sighted philanthropic capital can be critical to solving our world’s most complex challenges.
That’s a story worth telling.