The Center for Effective Philanthropy’s final report of its three-year study on the impact of MacKenzie Scott’s large, unrestricted gifts is overwhelmingly positive, with one notable exception: executives of other foundations have “mixed perspectives” on Scott’s approach.
The study lists the funder views of benefits and drawbacks of Scott’s giving — and almost all funders see some significant benefits in her approach: it strengthens recipient infrastructures, gives broad discretion on when and how to allocate gifts, and enhances recipient reputations.
But some funders express concern, too, including about: financial cliffs for recipient organizations, other funders dropping support, lack of transparency, and inadequate capacity in nonprofits to handle such large gifts. Perhaps most telling, despite nearly all foundation leaders saying they have discussed Scott’s work and see benefits in her approach, only 7 percent say Scott’s approach has had “some” or “a lot” of influence on their own giving practices.
What explains the continued mixed perspectives on Scott’s approach among funders, especially now, as nonprofits reel from federal funding freezes, grapple with attacks on their work and missions, and many face an existential crisis? Is it as simple as reticence to change, or is there more to the story?
To explore this question, it’s instructive to note Scott’s approach to describing her philanthropic work on her website, Yield Giving. Scott is careful and precise about language in her essays; she describes her “gifts,” not “grants.” Her writing is remarkably free of jargon — and she describes “laboring over every word” she pens. That attention results in thought-provoking phrases: “Yield Giving,” “Seeding by Ceding,” and “Generosity is generative.” Throughout her essays she uses plain language and dictionary definitions to explore words that describe her work: “philanthropy,” “giving,” and “investing.”
We can use a similar approach and explore the idea of a foundation’s context as one explanation for some funders’ ambivalence towards Scott’s approach. Context means “circumstances,” “a setting or environment,” or “the interrelated conditions in which something occurs.” The specific environment of each funder’s work is one of the most powerful influences on its philanthropic practices and beliefs. One explanation for funder concerns about Scott’s approach is that it isn’t aligned with their situations. Their giving is done under very different circumstances. In brief, context matters.
What are the circumstances of foundations? Most funders are embedded in a community, perhaps a geographic area or a subject area, or some combination. Every foundation’s work, no matter how its practices evolved, is connected to its community. Foundations have been interacting with their communities for years, shaping distinctive organizational cultures and developing unique histories of relationships, knowledge, and experience gained through working with their community’s nonprofits and the people they serve. Their connections are influenced by the structure of their philanthropic work, including the size, duration, and conditions of the foundation’s “grants.” This storehouse of experience in a specific context is a powerful lens for perceptions about philanthropic practices, including Scott’s approach.
For a funder to assess Scott’s approach — large unrestricted gifts with minimal reporting requirements and no time limit — it would be natural to consider how it would work in their own setting or context.
The first conclusion almost would have to be, “that would be a big change for us!” And funders know changing work practices and beliefs is a big challenge. Community expectations, staff roles and responsibilities, enduring relationships with nonprofits, past practices, complicated decision-making processes, competing priorities — all these factors and more constrain big shifts in what funders do and how they do it.
The CEP report gives an example of the organizational costs in undergoing such a big change. They quote a foundation executive whose foundation has undertaken steps towards adopting some of Scott’s practices:
“… this has required a complete overhaul of our staffing structure, budget priorities, grantmaking programs, and grantmaking processes. We had to exit grantees, resize/restructure the staff, and change how we organized board meetings … it has been a significant amount of work.”
It is worth noting that the executive also said it was worth it in order to be responsive to the community.
Such substantial changes are rare in foundations and are usually prompted by external events (natural disasters, a pandemic, high profile incidents such as police killing a citizen) or, less dramatically, leadership changes. Absent such events, foundations tend towards more incremental changes over time.
But there is hardly a better example of an exogenous shock that would prompt foundations to move faster to shift practices that support grantees in a turbulent context than the policies and actions of the second Trump administration. Unfortunately, it’s not the first such shock — nonprofits experienced a similar squeeze on their work and heightened need for swift, generous, and unrestricted support during the pandemic. As CEP reported during and after COVID-19, many funders did step up to meet that need. The should do so now, acting on the lessons from both 2020 and the evidence in this report on what large and unrestricted gifts can do for nonprofits and their communities.
Much attention has focused on Scott’s unique approach: large gifts, unrestricted in nature, with limited reporting required, no time limits. There is much in her approach that other funders can emulate. But there is an important difference in context that we should not overlook: That the vast majority of Scott’s giving is through one-time gifts.
This is an important difference between Scott’s approach and most institutional funders, who make multiple grants to nonprofits over a longer time period. This builds ongoing funder-recipient relationships in the context of their shared community, which can have a different set of benefits and risks from those identified in Scott’s approach. Indeed, the study quotes a foundation leader on the value of building relationships with nonprofits over time, and another who highlights the learning benefits of reports.
Ongoing funder-nonprofit relationships can also open the door to a variety of other ways, in addition to grant support, that funders can strengthen the nonprofits in their community. While the embeddedness of foundations in their communities has strengths and weaknesses, the main point here is that Scott’s predominant use of one-time gifts distinguishes her context. Her community is quite different from the cultures and communities built by most other funders.
CEP undertook this study in part believing it could benefit other funders’ learning. Overall, Scott’s approach provides something quite valuable to other funders. She gives an example of giving that offers the opportunity for funders to think about making big changes. Funders often don’t have the stimulus to think about significant shifts to improve the way they work. Scott gives us that, it is her gift to the field.
But Scott herself is clear-eyed about the wide variety of philanthropy. About her own work she writes, “This approach to philanthropy is not the only way. It’s just the one my resources and opportunities inspired in me.” Funders have a responsibility, particularly now, to consider what lessons they can apply from Scott’s giving — and CEP’s reporting on her impact — within their own context.
Scott’s implicit challenge is simple: what do our resources and opportunities inspire in us?
Bob Hughes is former vice president and chief learning officer at the Robert Wood Johnson Foundation and, most recently, was president and CEO of the Missouri Foundation for Health. He is now on the Community Advisory Board at United Way Rhode Island. Find him on LinkedIn.
