The Packard Way

With billions in new assets, foundation branches out while staying true to its roots

In the 1960s, when David and Lucile Packard held the first board meetings of their charitable foundation, they weren’t sitting in the spacious, redwood-paneled offices that house their Silicon Valley philanthropy today. Instead, the trustees gathered around the Packards’ kitchen table, steps away from the garage where Dave and his friend Bill Hewlett built a multibillion-dollar technology company from a $538 investment.

The Packards did not give away millions back then — and certainly nothing close to the $286-million the foundation plans to award this year, when its endowment will more than double to an estimated $9.1-billion after an infusion of stock from Mr. Packard’s estate. But the couple was able to lay the groundwork for a foundation that reflects their unpretentious but highly respected style of philanthropy.

The Packards’ four children — who joined the foundation’s board when they were in their 20s — are now doing all they can to insure that the fund does not lose its homespun flavor as it becomes the nation’s third-largest philanthropy. The two wealthiest are the Lilly Endowment and the Ford Foundation.

In their first philanthropic act after David Packard died in 1996 (Lucile had died nine years earlier), the children put in writing the key lessons they learned after years of listening to their parents’ kitchen-table grant making. They and the other board members adopted a code to guide future members and the foundation’s staff, insisting that Packard’s grant making must always adhere to the “graciousness,” the “respect for all people,” and the ability to “think big” that David and Lucile had always demonstrated in their philanthropic endeavors.

The foundation has little choice but to think big as it gets ready to accept, by March, the Hewlett-Packard stock from David Packard’s bequest, which is now worth $5.4-billion.

This year’s giving will rise by 42 per cent; in 1999, the foundation plans to award $450-million, which would mean a 124-per-cent increase in two years. Foundations are required by federal law to distribute at least 5 per cent of their investment assets each year, but Packard’s giving has often exceeded that requirement. In 1997, for example, the foundation gave away 6 per cent of its assets.

In anticipation of the bequest, foundation officials spent more than a year examining their grant making and seeking advice on how to broaden the foundation’s giving, which will now be extended to more national and international causes.

Among their new efforts:

* At least $175-million over the next five years will support a new plan to protect 250,000 acres of California land from development. That project alone will make Packard the largest environmental grant maker in the country, experts say. Packard plans to spend a total of $55-million on environmental causes both in California and elsewhere in 1998, up from $39.8-million in 1997.

* Spending on grants to improve non-profit management will rise from $3-million last year to $8.8-million this year. Concerned that the quality of management advice that charities receive is poor, Packard plans to spend money on improving the training of consultants who specialize in helping non-profit groups. It also will make grants to help charities involved in the often-difficult process of finding a new leader.

* Grants to help people, including those in developing countries, gain access to family-planning services will more than double in 1998, to $35-million.

The foundation’s board decided not to jettison any of its longstanding grants programs, which support causes such as arts and film preservation, children’s health and welfare, conservation, education, population control, and scientific research.

As the foundation grows, family members and other leaders say a top priority is to maintain the informal atmosphere that pervades the philanthropy’s headquarters, which were designed largely by Lucile Packard. Filled with natural light, exposed beams, and, in the board room, pictures of David Packard’s apricot orchard, it looks more like a California ranch than a business office.

The casual approach at the foundation, where everyone goes by their first names, is a direct reflection of the management principles that David Packard considered key in building Hewlett-Packard.

In his book, The HP Way, Mr. Packard said he believed firmly in “management by walking around.” He wrote: “Since its principal aim is to seek out people’s thoughts and opinions, it requires good listening.”

The foundation applied the concept of “management by walking around” as it decided how to handle its growth. Packard conducted a survey of 616 of its grantees, as well as 230 organizations that it rejected when they had applied for money.

Grant seekers were asked to comment on the professionalism of the staff, the helpfulness of their suggestions, how promptly the foundation responded to inquiries, and other foundation qualities. Based on the results, Packard now plans to improve its communications to explain more clearly why unsuccessful grant applicants are turned down.

Top staff members of the foundation met with grant makers across the country, and they also asked for four-page statements from 70 charity leaders in numerous fields to get ideas about what direction the foundation should take.

The foundation’s willingness to seek the opinions of charity executives has long won the Packard Foundation fans. Non-profit leaders say that Packard’s emphasis on listening to their opinions is a refreshing contrast to other big foundations, where program officers and top executives often are more interested in imposing their ideas than in letting grantees develop their own solutions to problems.

“They’re not afraid of trying new programs,” says Sharon Williams, executive director of Opportunities Industrialization Center West, a Packard grantee in Menlo Park, Cal. “Instead of saying, ‘That’s crazy,’ they say, ‘Hmmm, let’s try it.’ ”

She adds: “It’s nice to have a foundation say, ‘How can we?’ rather than, ‘Why should we?’ ”

Omowale Satterwhite, president of the Community Development Institute, an antipoverty group in East Palo Alto, Cal., concurs. “Packard program officers are in a learning mode,” he says. “They are not controlling.”

Although David and Lucile Packard also refrained from controlling their grantees, they got heavily involved in details that many philanthropists would never worry about.

David Packard built a special exhibit on coastal tides for the Monterey Bay Aquarium, which received about $50-million from the Packards.

Lucile Packard helped to design the children’s hospital at Stanford University, which was named after her in recognition of the more than $140-million in Packard money that the institution received. Mrs. Packard placed a high value on features that would comfort kids. For instance, she insisted on putting beds in each child’s room so that parents could stay the night with their youngsters.

But when the couple decided that they would leave the bulk of their assets to philanthropy, they also decided that they would not place any grant-making restrictions on the foundation. They trusted their offspring — each of whom had already received substantial financial gifts from their parents.

“Mother and Father knew they wouldn’t be here forever to know what the issues of the day would be,” says Susan Packard Orr, the founders’ third child and chairman of the board. “I wouldn’t say we make a lot of decisions based on exactly what they might have done. We feel their presence, but not a heavy hand.”

The foundation has thus far not had to face the kinds of family squabbles that have torn apart other philanthropies and led them to swerve far from the visions of their founders. The four Packard children “don’t always agree on everything,” says Cole Wilbur, Packard’s executive director, who has been with the foundation since 1973. “But they know how to get along and make things happen, so the foundation is able to move forward pretty well.”

Observers have high hopes for what the family can achieve in its philanthropy.

“The Packard children will run the foundation with the same good sense as their parents,” says Paul Saffo, a director of the Institute for the Future, a think tank in Menlo Park, Cal. “But I would be surprised if they didn’t do it a little differently because they are just as innovative as their parents were.”

One indication of the children’s willingness to deviate from their parents’ policies: The foundation may soon start to make grants for computer equipment. While Mr. Packard was alive, the foundation rigidly avoided making such grants because it did not want to put grantees in the awkward position of having to choose whether to buy computer products from Hewlett-Packard or from one of its competitors. Mr. Packard also was very concerned that equipment grants could imply that the fund was trying to advance his business. But now the fund — which elected Lew Platt, the company’s chief executive, to the board this month — is reconsidering the policy.

While computers may make its grantees more efficient, the Packard Foundation has come to realize that to make its own operations more effective, it needs many more staff members who can dole out grant dollars with care.

The foundation is rushing to hire staff members in part to cope with the crush of proposals — 4,000 grant inquiries and proposals were received last year, and more are coming in as news of Packard’s growth reaches the charity world. In 1996, Packard had 58 employees, and officials expect to see as many as 120 in newly expanded offices by year’s end.

The foundation is conducting national searches to fill several senior positions. It just hired Sarah Clark, who was previously a top official at the U.S. Agency for International Development, to head its rapidly growing population-control program.

Ms. Clark will guide Packard’s work to support both domestic and international groups that educate citizens and policy makers about the effects of population growth.

As Packard’s growth phase kicks in, the foundation also plans to increase its efforts to educate people about conservation. It will give money to charities that encourage more public participation in discussions and decision making about land use, transportation policy, and appropriate levels of development in specific geographic areas.

Packard’s plans to pour $175-million over the next five years into efforts to protect three regions of California — the Central Coast, the Central Valley, and the Sierra Nevada — have attracted much praise from environmental leaders. Not only will Packard’s support help prevent an assault on natural habitats as the state’s population and industry continue to grow, say charity leaders, but it will also offset recent cutbacks in giving to environmental causes by several California-based companies.

Working with environmental groups like the Nature Conservancy and the Trust for Public Land, the foundation has set aside money to buy land. It also plans to purchase development and water rights — a practice that is not very widespread among environmental donors.

In some cases, the foundation will give grants or make loans to charities that help conserve the land. The foundation is also interested in preserving agricultural land.

For the first time, Packard has extended its conservation efforts into the Western Pacific. Its programs to protect fisheries and coastal habitats will now focus on both the U.S. Pacific Coast and the area bordered by Indonesia, the Philippines, and Papua New Guinea.

Packard is not only looking to broaden its reach to overseas charities. The fund is also deepening its commitment to improving the internal operations of grantees in the United States through its “organizational effectiveness” program.

“On a dollar-for-dollar basis, this is probably the most effective program we have,” says Mr. Wilbur, Packard’s executive director. “There’s no good reason to give an organization a grant if its management or goals are not well thought out.”

Some new money is earmarked for what many charities hail as inventive approaches to improving the stability of their organizations.

The foundation plans to make grants of $50,000 to $100,000 to help non-profit groups weather transitions in chief executives. A poll > of recent Packard grantees found that 41 per cent of them had experienced such transitions in the previous three years; follow-up interviews with respondents revealed that leadership changes had been difficult for their organizations.

“We want to change leadership transition from a crisis to an opportunity by giving grantees resources to make it possible for them to reflect on the future,” says Barbara Kibbe, Packard’s program officer in charge of the effort. The grants, she says, can be used to help pay for planning for the organization’s future under a new leader, to hire an executive-search firm, and even to pay the salary of an interim chief executive.

Ms. Kibbe is also shepherding a new program to improve charities’ use of consultants. She has already overseen an initial round of grants to pay for training and other resources to improve the skills of consultants who work with non-profit groups. Those grants, many charity officials say, may well mark the first time a grant maker has been willing to pay for programs to aid consultants.

The Packard Foundation is also spearheading the creation of a new group of grant makers who give money to enrich charities’ management capabilities.

The group, affiliated with the Council on Foundations, will have its first meeting at the council’s annual conference in April. Already, about 90 foundations have expressed interest.

But with characteristic modesty, Packard officials are quick to say they want no credit for the creation of the group — or for any other activity that makes them stand out. In fact, foundation leaders were reluctant to pose for a photograph to accompany this article, saying they wanted their grantees to take center stage.

In doing so, they follow the example set by the founders. When Mr. Packard retired in 1993 as chairman of Hewlett-Packard, he was asked to reflect on what he felt was his most important achievement. He sidestepped the question.

“I think you get the most satisfaction in trying to do something useful,” he said. “After you’ve done that, you ought to forget about it and go on to something else.

“You shouldn’t gloat about anything you’ve done.”