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Two Years Later, Part Two: Who Trusted, and Why It Matters

Date: April 12, 2022

Phil Buchanan

President, CEP

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I’ve been thinking recently about what’s changed since March 2020 when it comes to the nonprofit sector; foundation and individual giving; and my take on leadership. This is the second post in a three-part series.

While the general public’s trust in nonprofits has declined, as I discussed in my last post, foundations — and some of the very biggest individual donors — have moved in the other direction, trusting nonprofits to an extent we have not seen before. In so doing, they demonstrated the role that they can play as a force for good and a provider of crucial resources to nonprofits on the front lines in a time of crisis.

Admittedly, there’s no “trust barometer” for foundation staff’s views of nonprofits. However, the data suggests that, in the past two years, staffed foundations acted differently, and more trustingly, than they had before. At CEP, we tracked foundation changes during 2020 and 2021 and, in November of 2021, we reported that virtually all foundation leaders who responded to our survey said their foundations are working differently now than in early 2020 in ways that suggest greater trust in nonprofits and attentiveness to the particular challenges nonprofits face in working with funders. (Even allowing for possible response bias, there is strong evidence of real change.)

Most frequent among the changes reported were streamlining processes to reduce the burden on grantees and providing more unrestricted support — changes these foundation leaders say they will sustain. A survey of our nonprofit panel suggested that nonprofits were indeed experiencing these changes, offering some corroboration.

These efforts to reduce restrictions and requirements were no doubt fueled both by recognition of the practical challenges nonprofits were facing and by the advocacy of many over the years for this kind of change, including those behind the “trust-based philanthropy” movement. For many of those foundation leaders who were contemplating moving in this direction, the crises of 2020 became the burning reason to just make it happen. And for some who had been steadfastly set in their ways, the pandemic was a needed wake up call.

Spurred by the murder of George Floyd by police and resulting racial justice reckoning, many foundations also engaged questions of racial equity more explicitly, in many cases — as our research documented — modifying how they identify applicants, providing more funding to Black and Latino communities, listening more intensively to grantees, funding systems change, and collaborating.

To be sure, this attention was long overdue, and there is much, much more to be done. Foundation boards overall, with notable exceptions, remain shockingly lacking in racial diversity, and boards are often seen by foundation leaders as impediments to a deeper focus on equity. There are, of course, still many foundations that haven’t really engaged, or sometimes even acknowledged, systemic racism and how it relates to their work. Additionally, our research has documented how Native American and Asian American and Pacific Islander (AAPI) communities have been overlooked by foundations, including in these past two years.

Those are just a few of many, many examples of the significant work that remains. Still, as my colleague Ellie Buteau, PhD — who led the research — and I have said repeatedly, we saw more change in foundation practices and approaches in two years than we had in the previous two decades. We learned that foundations could work differently, that they could change quickly when circumstances motivated them to do so.

Foundations also increased their giving, with many pushing beyond their typical spending levels in 2020. Much is made of the increase in overall charitable giving in that year — and the narrative is often about how individual donors stepped up. But that narrative doesn’t hold up to scrutiny. Actually, it was foundation giving, which jumped nearly 16 percent in inflation-adjusted dollars — spurred both by the urgency of the times and incredibly strong endowment returns — that pushed the overall numbers up. Individual giving, according to Giving USA, was virtually flat — up 1 percent adjusted for inflation. (We will see the data on 2021 giving levels from Giving USA in a couple of months.)

Without the giving of one individual, MacKenzie Scott, individual giving would have actually declined in 2020. Providing billions to nonprofits, including many focused on issues of equity and/or led by people of color, Scott became, virtually overnight, an extraordinary philanthropic icon. She emerged as an exemplar of the trust movement, providing massive unrestricted gifts and requiring very little in either the proposal or reporting processes.

Scott’s approach has been held up by some observers as a kind of rebuke to other models of giving. But I see it as part of a larger trend of donors and foundations moving away from the top-down, donor-knows-best approaches to philanthropic strategy that have so often failed. In its place, increasingly, is an approach that recognizes and respects the expertise of those closest to issues and communities, including the expertise that comes from having been affected directly by issues.

The case for trust, ultimately, is about effectiveness and impact. (What’s needed still, and CEP is undertaking a project to begin to do this over the next several years, is more research on what happens when donors give in this manner.)

It feels truly odd that, just as the general public is trusting nonprofits less, foundations and some of the biggest donors are trusting them more. Or maybe it is yet another illustration of the perceptual chasms in American society.

But, regardless, this trust trend among foundations and some big donors is positive, in my view, even if we can all point to too many individual foundations that remain top-down, even coercive, in their relationships with their grantees. The reality is more than a few foundations actually showed their mettle these last two years and, in doing so, made a strong case — if we really analyze what happened — for the unique role that endowed, long time horizon institutions can play in a moment of great crisis.

We should remember that the pandemic arrived at the tail-end of a flurry of high-profile, and often highly generalized and unnuanced, critiques of “big philanthropy” as somehow inherently illegitimate. In this context, the pandemic, coincidentally, provided foundations a chance to demonstrate why they matter. Many took it — supporting crucial nonprofits with stepped up giving and more trust in them to deploy those resources wisely to help people and communities in a time of great need. The challenge now is to sustain and build on these changes.

In the next and final post in this series, I’ll discuss how my understanding of good leadership shifted in these past two years.

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.

Disclosure: CEP received a $10 million gift from MacKenzie Scott and Dan Jewett in 2021. We are also conducting research, funded entirely by project support from foundations, on how recipients make use of these gifts and what the impact is on their organizations — and their ability to execute their missions — over time.

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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