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Big Changes and 7 Big Questions for Big Philanthropy

Date: October 18, 2022

Phil Buchanan

President, CEP

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It’s remarkable to reflect on how much has changed since 2019, when big philanthropy was wrapped up in self-critique prompted by a range of high-profile critics.

But the pandemic and the racial justice reckoning of 2020, and the sense of urgency they created, rendered the sweeping, generalized critiques of donors a bit less relevant, at least for the moment. People needed help, and crucial nonprofits needed support to provide that help, whether it was ideal for donors to be funding what government arguably should be funding or not.

The challenges of the crisis, crises really, also made some of the specific shifts in practice that had been much discussed in Philanthrolandia — but less often implemented — that much more relevant. Rather than focusing on the meta-level critiques, leaders zeroed in on the specifics of what their institutions could and should do better in a moment of great need. Hundreds of grantmakers signed onto a pledge, hosted by the Council on Foundations, to shift practices to be more helpful to nonprofits. There was an overwhelming sense, prevalent at long last, that donors shouldn’t hamstring nonprofits.

CEP’s research showed, as we documented in four separate reports, the degree to which practices really did change. As my CEP colleague Ellie Buteau and I have observed many times, including in this Chronicle of Philanthropy piece from earlier this year, we saw more shifts in practice in the two years following March 2020 than we had in the previous 20, including stepped up spending levels, more general support, streamlined processes, and more thoughtful engagement with questions of racial equity and systemic racism.

Foundations and nonprofits — not all, but many — stepped up in a time of need, demonstrating their value in a crisis and calling into question some of the more extreme and unhelpful hand-wringing about whether philanthropy could even be a force for good. Sadly, this performance appears not to have translated into greater public appreciation for nonprofits or philanthropy. Trust in nonprofits among the general public has only declined, as I discussed here earlier this year, even as foundations and big donors, like MacKenzie Scott, operate with higher levels of trust than have typically characterized their ilk.

So, even as the sense of acute crisis fades, or maybe evolves would be a better word, philanthropy faces some big questions. I will try to lay them out as I see them — recognizing that others would have different questions and that my perspective, inevitably, is subjective.

1. Will the changes in how foundations and donors support nonprofits be sustained — and implemented thoughtfully?

The rhetoric in the circles of big donors and foundations has shifted radically from a decade ago. Ill-fitting business analogies haven’t completely faded from the philanthropy conversation, unfortunately, but they’re less likely to be invoked and more likely to be challenged. While some foundations, including some of the largest, continue to operate in a top-down manner — making restricted gifts and dictating strategies to follow that have been concocted within their walls rather than collaboratively — the conventional wisdom has shifted.

An emphasis on “nonprofit accountability” has faded. In its place is talk of “trust” and a realization that those closest to issues and communities have unique insight into what is needed, insight that sometimes eludes the “experts.” There is evidence that, finally, donors and foundations are recognizing that nonprofits need flexible support and that lengthy proposal and reporting processes aren’t always necessary.

We see the shifts in our research, as I described, and we also experience them: an increasing number of CEP’s funders have invited us to scrap written interim and final reports and just talk instead — or submit reports or performance indicators we have already prepared for ourselves or other audiences.

This is positive and, purely anecdotally, the program staff implementing these changes seem to like them better too — and to feel they’re actually getting better information. But I hear some worries, which I share, that the emphasis on trust not be blind or doctrinaire. Context matters. I spoke to a major donor in a country with little regulation of NGOs and rampant corruption recently and she said, “I really like the idea of a trust-based approach, but there is a lot of corruption here; am I supposed to trust immediately, or can I wait until I know a little about the organization?”

Fair question and a reflection that sometimes the focus on trust is presented too simplistically. Too often, we’re presented with binaries. A reporter focused on philanthropy recently asked me whether I was a proponent of strategy and assessment in philanthropy or if I was in the trust-based camp — as if those two were somehow mutually exclusive. In a similar vein, a professor at a leading business school in a class to which I was invited to speak recently put up a slide suggesting donors faced a choice of whether to be strategic, like the Gates Foundation, or trust-based, like MacKenzie Scott.

But this is a totally false, and very unhelpful, choice. Thoughtful donors and foundations reject the notion that there need be a dichotomy between strategy, assessment, evidence, and learning on the one hand and trust, listening and flexible support on the other. They recognize that trust develops over time. They embrace mutual accountability. They realize that, while the knowledge and expertise of those closest to issues should be respected, foundation staff and donors do often possess useful knowledge, too.

My hope — and this is something we will seek to shed some light on in our three-year “big gifts study” looking at recipients of MacKenzie Scott’s giving — is that we can make the argument that more respect for and trust in nonprofits and those they serve will yield better results: that we can link, empirically, a more nonprofit-centric approach to giving with greater impact in pursuit of shared goals.

2. Will racial equity be prioritized, or will an orchestrated backlash and complacency push it back down the priority list?

In the summer and fall of 2020, many American foundations engaged questions of systemic racism in ways they had not before. We documented this in our Foundations Respond to Crisis research — particularly a report released at the end of 2020 and another one published last November. This was a welcome if (long) overdue recognition of the intersection of structural racism with pretty much every programmatic area in which a foundation might work — from education to poverty to the environment. (To be fair, some foundations had engaged these questions substantively long before 2020; but many, quite frankly, had not.)

However, while our research last year did not pick up on it, I now see at least some anecdotal evidence of a slippage in commitment, owing perhaps to the orchestrated backlash by those (such as Philanthropy Roundtable) who argue spuriously that a focus on racial equity comes at the expense of a focus on, say, rural poverty and that, somehow, focusing on racial equity is divisive. The extent to which some on the right have gone to foment fear and division and to target people of color (and LGBTQ people) is shocking if not surprising.

The brutal reality of these efforts makes some of the extremes, or maybe just silliness, on the left — like when a Yale professor argued that President Biden working while he had COVID was a manifestation of “white supremacy culture” — all the more frustrating because these inanities distract and give fodder to those wishing to manufacture fear about some kind of oppressive “woke culture” (whatever that even means). Moreover, they can consume staff time and energy unproductively: In this widely circulated and much discussed June article from Intercept, author Ryan Grim argues that these kinds of conversations have “paralyzed” progressive organizations at a time when their work is badly needed. (I am more sympathetic than Grim is to the concerns of some of the staff members he describes, but I take his point.)

As Vince Stehle of Media Impact Funders notes, “Progressive advocates of social change should have an open and honest debate over terms and perhaps be a bit more flexible in what is acceptable speech and policy.” This is right, and Stehle is also right to reject false equivalencies, noting that “excesses in the faculty lounge are nowhere near as dangerous as the authoritarian assault on the true history of racism in America.” That’s for sure.

Indeed, there is real reason to worry that racial equity was the flavor of the month for some: I have spoken to foundation CEOs who are now struggling with a waffling among white board members who had shown a new appetite for addressing race and racism in late 2020. And we see in our research that foundation CEOs often see their (typically overwhelmingly white) boards as an impediment to a deeper commitment to addressing systemic racism.

What comes next is unclear. But, as racist rhetoric and denialism from elected leaders only seems to increase, this is a time for sustained commitment — and the courage and grit that it requires.

3. Will philanthropy step up on climate change?

There is a disconnect between the belief among many foundation leaders that climate change represents an existential threat requiring immediate action and the relative inaction — whether through significant grantmaking or divestment from fossil fuels or both — of most foundations, as our recent report, Much Alarm, Less Action, documents. The question now is whether this will change. The recent announcement by Rockefeller Foundation that it will focus its grantmaking on climate and divest from fossil fuels is significant, assuming its commitment is sustained.

Will the significant attention climate has received this past summer — driven by stories of extreme weather and stifling heat and droughts around the world — lead more foundation leaders and boards as well as individual donors to commit to taking action on climate? (My hope, as I made clear in this op ed with my colleagues, is that it will.) Or will they continue to feel that this is outside their mission, lacks board support, or is just too big of an issue for them to know how to productively address (the three reasons surfaced for a lack of more action in our research)?

4. How will philanthropy balance the need to counter polarization with the need to call out extremism?

Polarization is well-documented and there is considerable evidence it’s grown worse in recent years. This period of polarization has been “longer, deeper, and more complicated and is likely to be more threatening to the future of the country than the others” in American history, argues Columbia University professor Peter T. Coleman in “The Way Out: How To Overcome Toxic Polarization.”

There seems to be a growing interest among funders — see for example the New Pluralists — in supporting efforts to combat polarization, as well as a burgeoning number of nonprofits focused on finding common ground and building bridges across ideological differences. This is clearly crucial work and Coleman and others offer powerful specific, usually local, examples of where this has happened as well as specific tactics and techniques for bridging differences.

The trick, however, is to balance this bridge-building with a need to establish guardrails: to ensure that, in the effort to find common ground, we don’t end up legitimating or raising the profile of those spouting hate or lies, creating false equivalencies, or normalizing extremism. To choose one example, is a major foundation’s inclusion of Tucker Carlson in an event it co-sponsored earlier this year a helpful attempt to hear from a range of voices or a naïve move that only legitimates and elevates the views of someone spouting destructive hate and lies? (My view is that it is the latter.)

In a powerful op ed in Inside Philanthropy, Crystal Hayling, CEO of the Libra Foundation, takes serious issue with the notion that “‘division is the biggest problem afflicting American democracy.” She writes:

“ ‘return to civility’ at the cost of truth-telling escapes me. I don’t long for some fantastical time when, in back rooms without women and with whiskey, laws were hashed out. There has never been a time when we got a seat at the self-determination table by being sweet and docile. Redressing injustice requires agitation. Change generates friction.”

This question of how to address polarization without either accepting inequities that should not be accepted or normalizing extremism is vexing, but crucial.

5. How can philanthropy best act to protect our democracy?

Related is the question of how, if at all, philanthropy can counter the assault on our democracy and democratic institutions? The threats are real: gerrymandering; the candidacies of election officials who perpetuate “the big lie;” and a Supreme Court that seems genuinely out of step with the contemporary mainstream and could invoke constitutional justifications for rulings that make our system significantly less democratic. Meanwhile, the proliferation of “dark money” and 501(c)4’s raises questions about the outside influence of donors on both the left and right.

It is difficult to judge the success of high-profile efforts like that of the Chan Zuckerberg Initiative (CZI), which granted $200 million to strengthen the voting infrastructure but faced an intense backlash that may have contributed to its decision to end these efforts. How philanthropy can act to protect and strengthen democracy without being seen as anti-democratic itself in its interventions feels like a riddle. Many other regional and national foundations have sought to build civic engagement without wading as directly as CZI did into the election infrastructure questions.

In some cases, an indirect approach may be most effective. This is what I took away from a recent book by my friend (and long ago CEP intern) Catherine Herrold, now of Syracuse University, exploring efforts to foster democracy in Egypt. As I noted in a blog post last year, Herrold’s book is in many ways a critique of the top-down approach that has characterized both U.S. foreign aid and some ‘big philanthropy’ as well as a stirring reminder of the value of organizations that are closest to the regular people who make up communities and are trying to make ends meet. Those seeking to promote democracy, Herrold argues, should “look beyond the usual suspects as grantees and seek a wider range of views and insights from people across geographical, socioeconomic, religious and cultural communities.”

All that said, it’s hard to know which are the most effective levers to pull to protect democracy. And it’s even harder to imagine doing nothing.

6. Are we headed into a recession? What will be the effect of a more tumultuous market for investors, as well as continued high inflation?

The current economic environment is confusing, to say the least. Unemployment remains low but inflation has put tremendous pressure on both those living in poverty and middle-class people living paycheck to paycheck. Housing demand is plummeting as mortgage rates have increased, pushing up rents dramatically. Meantime, the incredible stock market performance of 2021 has given way to a 2022 in which, as I write this, the S&P 500 is down 25 percent year to date.

What will be the effects of all these conflicting indicators be on individual donor behavior (more below, in number 7)?

While foundations showed their willingness to step up payout levels in the context of the pandemic, the strong stock market of the second half of 2020 made that decision much easier than it might otherwise have felt.

What will happen to foundation spending levels if economic hardship for working and poor people is coupled with declining endowment values? And, what will high levels of inflation do to nonprofit finances and to nonprofits’ ability to attract and retain staff talent?

7. Related, will household rates of giving to nonprofits continue to taper off? How will that affect perceptions of legitimacy of the nonprofit sector and philanthropy — and will that translate to legislative changes?

As we have discussed on the CEP blog and in a webinar in June, even as big donors and foundations trust nonprofits more, the general public is trusting nonprofits less — despite the heroism of so many nonprofits in the wake of the pandemic. (See also Independent Sector’s important research on this issue.) In addition, as the Lilly School of Philanthropy at Indiana University has documented, household giving rates have declined these past two decades. Indeed, foundation giving, which was around 12 percent of total giving two decades ago has grown to nearly 19 percent today (despite the confident predictions of pundits that foundations were “dinosaurs,” yesterday’s news, and increasingly irrelevant). Giving by individuals now comprises a much lower share of total giving than it did two decades ago, according to Giving USA, and if, to the point above, we end up in a recession, then individual giving is likely to further stagnate or decline.

Put it all together and there is reason for concern that, while many “regular” Americans continue to give, their numbers are dwindling (perhaps in part because of a view promoted by some on the right that philanthropy and nonprofits are arms of the left). Philanthropy is increasingly influenced by foundations and mega-donors. This has significant consequences for nonprofits but also for perceptions of legitimacy and support, and, in turn, for potential legislative changes that would affect philanthropy.

While the reforms pushed by John Arnold of Arnold Ventures and Ray Madoff of Boston College Law School, affecting DAFs as well as foundations, don’t appear to have gained much momentum in Congress, or at least not yet, the rhetoric from politicians and pundits denouncing big philanthropy — from Ohio senate candidate JD Vance to the aforementioned Tucker Carlson — seems only to be intensifying. It will be interesting to see how community foundations, in particular, navigate this moment and, perhaps, more forcefully articulate their unique role as a bridge between everyday donors and crucial nonprofits.

Just 7 Questions

Those are just seven questions that come to my mind. But they are probably just the beginning of the list.

Some I shared an earlier version of this essay with suggested crucial other topics, too: mental health challenges and burnout among nonprofit leaders and staff; related, the question of the future of talent in the nonprofit sector and now to nurture and retain it; the role of artificial intelligence (AI) as a force in our society and how to harness it for good; questions about how to choose goals and whether to focus on the near-term or the long-term; and challenges with assessing results. These are all important questions, too.

The list I shared is just one take, inevitably influenced by my own biases and perspectives, of what feels absolutely most pressing in a very pressing time. But, whatever your take on what I may have missed, this much is clear: the questions facing philanthropy in this moment are big and, so too, are the consequences of how they are answered.

Phil Buchanan is president of the Center for Effective Philanthropy, author of Giving Done Right, and co-host of the podcast by the same name. Follow him on Twitter at @philxbuchanan.

Editor’s Note: CEP publishes a range of perspectives. The views expressed here are those of the authors, not necessarily those of CEP.

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