Good Grant Making Requires Expertise

America’s grant-making foundations grapple with our nation’s most daunting problems — persistent poverty, the failure of public schools, disease epidemics, rural isolation, urban decay — so nobody should be surprised when their best efforts sometimes fall short of the mark.

What makes little sense, however, is that so many of these well-endowed organizations repeatedly fail to deploy their best resources: In effect, they fight poverty, ignorance, and disease with one hand tied behind their backs. Inexplicably, it is usually their board members and top leaders who have tied the knots.

How could foundation leaders create their own obstacles to effectiveness? They do it in ways large and small, but chiefly by ignoring the lessons of history, slighting the value of experience, denigrating the importance of training in grant making, and denying the importance of professional associations that can make them more effective by helping them collaborate to solve problems that no single institution can tackle on its own.

Over the past century, innovative foundations have developed a body of strategies, tactics, and techniques — many of which have worked, some of which have failed — but all of which have immense instructive value to donors starting new foundations, or to new board members joining existing foundations.

A few donors have studied this invaluable record — the Bill & Melinda Gates Foundation’s grant-making efforts to fight disease in developing countries owe more than a little of their strategy and tactics to those of the General Education Board and the Rockefeller Foundation nearly a century ago.

But far too many newcomers to philanthropy behave as if philanthropic history began the moment they stepped across the threshold of their foundation. They are certain that past foundation efforts have been mediocre at best and have little of value to teach them.

That seems especially true of donors who have come directly from great success in the business world and who are determined to use exactly the same methods in the world of philanthropy. Thus old mistakes are repeated, and worse, old successes ignored.

If foundation history is often neglected, the experience gained by working in foundations is usually altogether slighted. In most careers, experience is agreed to be a good thing. Most people would choose a neurosurgeon, for example, who had successfully completed hundreds of operations, over a rookie just out of medical school.

Some foundations see wisdom in this approach, for the James Irvine, W.K. Kellogg, Kresge, and David and Lucile Packard Foundations and the Silicon Valley Community Foundation are all ably led by chief executives who earned their stripes in the grant-making trenches.

The great majority of foundations, however, seem to regard experience in the foundation world as no great asset, and perhaps even a liability. Boards repeatedly hire university presidents, business executives, and senior politicians for the top jobs in foundations.

On occasion, as in the case of John Gardner at the Carnegie Corporation of New York, this approach works beautifully. Mr. Gardner, who was a psychology professor and a member of the military before he joined Carnegie as a staff member and rose up the ranks, went on to serve as secretary of health, education, and welfare under President Lyndon B. Johnson.

Far more often, however, no matter how smart and well-connected these leaders are, they initially stumble due to their lack of experience with the grant-making and nonprofit worlds.

Donors frequently have a tendency to choose the leaders of their new foundations based less on merit and more on a personal level of comfort, which leads them to name their accountants or lawyers as chief executive (or worse still, their college roommates or golfing buddies). While it is true that foundation experience is in itself no guarantee of success, it is also true that foundation inexperience is a guarantee of a long learning curve that can diminish a leader’s effectiveness.

One might reasonably assume that if many donors and board members slight the value of experience, they would at least want to make every effort to assure that foundation leaders and program officers get training once they are on the job. After all, organizations as diverse as the U.S. Army and major religious denominations agree that new recruits need extensive training to become highly successful.

While some foundations understand this, thousands of others hire staff members without experience in making grants or working at nonprofit organizations, and then set them to work without systematic training from outside organizations.

Why do they think that people, who last week were in business or in government service, do not need preparation as they seek to tackle some of the toughest social problems of our times? And why is it desirable to subject applicants and grantees to a long process of trial-and-error learning by green foundation staff members?

The low value that many foundation boards place upon learning about and identifying with the rest of the foundation world explains another self-imposed problem: the lack of cohesion among grant makers.

Foundation leaders should recognize the value that arises out of banding together. Not even the largest of the nation’s grant-making foundations commands the resources necessary to successfully grapple with today’s most-vexing social issues; it would seem that working cooperatively would be their top priority.

Indeed, some foundation leaders do: The heads of the Ford, Hewlett, Kellogg, Meadows, and Mott Foundations, as well as the leaders of the the Grand Rapids Community Foundation and the Rockefeller Brothers Fund, have been among the leaders in supporting the Council on Foundations, the Association of Small Foundations, regional associations of grant makers, and the Foundation Center.

Sadly, though, such exemplars represent a distinct minority; in fact, there is a colossal “free rider” problem among the vast majority of the nation’s foundations.

Only about 3 percent of all grant-making foundations belong to the Council on Foundations, and no professional organization of grant makers can claim more than 4 percent of foundations among its membership. The roughly 90 percent that are completely unaffiliated offer many rationalizations: They are so distinctive that membership does not make sense, for example, or they are so advanced that the “basic” benefits offered by the professional organizations are not helpful to them.

So these foundations watch a tiny minority of their sister foundations pay the freight required to protect and elevate the grant-making profession, and consistently take more from the party than they contribute.

Those sins committed by many foundations — a tendency to be ahistorical, the preference for inexperience over grant-making experience, the low regard for training, and the free-rider problem — make for a worrisome list, but not an exhaustive one.

Other transgressions that should be added include the mix of arrogance and timidity that gets in the way of grant making that can make a real difference; the tendency to do things unilaterally to people instead of collaboratively with people; the creation of inefficient internal cultures; and an excessive aversion to publicity.

A century of foundation history has produced a body of principles and practices that are being codified and taught, along with a small but growing bookshelf of solid references. Foundations certainly have the financial resources necessary to train their employees.

What is most needed, but currently in short supply, is the leadership required to make excellence a norm in the field. Such leaders would be steeped in foundation history, respect actual experience in grant making, demand that their colleagues be well-read and well-trained in the practices of effective philanthropy, and make their foundations bedrock supporters of a stronger philanthropic field.

That is the essence of good management of foundations, whether the foundation is large or small, community or private, conservative or liberal, strategic or responsive.

Some foundation leaders are showing signs that they understand the challenges. They are openly discussing their foundations’ honorable failures, listening to bloggers’ and pundits’ constructive criticism, and embracing experiments in showing the public more about their grants and programs.

This kind of leadership offers hope that the hands tied behind too many foundations’ backs will be released, thereby unleashing their full power to improve the lives of people.

Joel J. Orosz, a former foundation program director, is the founder of the Grantmaking School at the Dorothy A. Johnson Center for Philanthropy of Grand Valley State University. His new book, Effective Foundation Management: 14 Challenges of Philanthropic Leadership — and How to Outfox Them, from which this article is condensed, will be published this month by AltaMira Press.