My CEP colleagues and I have seen the inside of more foundation boardrooms than just about anyone. It is, perhaps, a dubious distinction – though some boardrooms have amazing views that are definitely worth seeing. But it does give us a little insight into what is, and isn’t, being discussed in those hallowed halls.
We’re usually in those boardrooms because we’re presenting results of our assessments, including Grantee Perception Reports (GPRs) and Applicant Perception Reports (APRs), often for an hour or two. Regardless of how long we’re in the room – I was once given six minutes by an impatient and irritable board chair – we’re often able to sneak a peek at the full agenda. While I am impressed by some, I am struck by how often the agendas seem pro forma. Too many seem a cut and paste job from past agendas – in September we always do this, in February we always do that – packed with items but not necessarily focused on the most crucial issues of the moment.
That’s too bad, because there are pressing, strategic questions raised by the current context and environment that every foundation board should be grappling with. Let me suggest five in particular.
[Disclaimer: I am not arguing that these are the only questions boards should be discussing. There are many others, from how the endowment is invested to perpetually vital questions of strategy and performance assessment. I am, instead, arguing that these five are especially crucial at this very moment.]
- What should our response be to a decline in individual giving?
The latest Giving USA data shows a drop in individual giving of more than 3 percent in real terms last year. Individual giving is likely only to decrease further as the implications of the 2018 tax reform – and the dramatic reduction in itemizers – are fully felt. Meanwhile, a survey by Candid earlier this year found that more than 80 percent of foundations expect their giving to be flat or to decline in 2019. If a decline in individual giving is accompanied by flat or declining foundation funding, that’s a one-two punch to nonprofits that will have significant negative consequences, imperiling vital work at an especially challenging moment for many (more on that later).
Retrenchment on the part of foundations, at exactly the moment nonprofits are being hit by a decline in individual giving, is a pattern we have seen before, and it’s counter to effectiveness. As I argue in my book (yes, I am quoting myself – forgive me), Giving Done Right:
Givers tend to retrench when nonprofits retrench, essentially forfeiting one of their most powerful potential roles. … In putting the preservation of their assets above all else – often, in the case of foundations, mistakenly believing it’s their fiduciary responsibility to do so – they simply exacerbate challenges for nonprofits during an already difficult time.
Instead, foundations should consider whether they can be counter-cyclical forces, especially for key grantees whose goals most closely align with their own, by upping their support levels and making their grants unrestricted and multi-year. Given the current context, boards should be debating how much to increase their grants budgets, as Rockefeller Brothers Fund and the MacArthur Foundation, among others, did during the Great Recession a decade ago. The focus should be on impact and programmatic results. After all, what’s an endowment for if not to provide this kind of flexibility and ability to take the long view?
- How are we getting feedback on the internal climate and, more broadly, the performance of the CEO?
Reporting in recent years by journalist Marc Gunther on the internal climate at foundations as well as prominent nonprofits have put front and center this uncomfortable question: what is the board’s responsibility for ensuring a positive work climate and, more broadly, for assessing the CEO?
I’d argue that assessing the CEO against agreed-upon goals is among the fundamental and core responsibilities of a board and that a key component is evaluating the CEO’s performance as a manager of people – people who, after all, are doing the work of the organization each day. Yet BoardSource reported in 2018 that a third of foundation CEOs – out of a study that was admittedly not representative but included well over 100 – hadn’t been evaluated in the past 12 months.
That’s a dereliction of duty. As I noted in a blog post at the time, the percentage of boards that review their CEOs annually should be the same as the percentage whose financials are audited, or who complete their 990-PF: 100. The functions are of at least equal importance.
Any good review process will allow staff to provide their confidential take both on what it’s like to work at the foundation – utilizing a tool such as CEP’s Staff Perception Report (SPR) – and their insights more specifically on what it’s like to work with the CEO. At CEP, we use our own SPR each year (a third party administers it). And we have a simple annual 360 feedback process that allows any member of the staff to freely comment on me – with their identity completely protected. Those comments go to an outside consultant who compiles them and provides them simultaneously to a committee of our Board of Directors and to me. This feedback is a crucial input into my review process.
Anne Wallestad, BoardSource’s CEO, writes, “it can be very easy for boards to have a false sense of security about the chief executive’s leadership based on what they see in the context of board meetings or other direct engagement.” As she argued in this excellent piece in the Nonprofit Quarterly last year, there are data sources that are easily available, including some I have mentioned above, to help guard against this kind of insularity.
- Who isn’t in the room who should be?
The past year has seen intense critique of foundations and philanthropy. I have argued both that critique is healthy and that some of it has jumped the shark – with over-generalizations and a dramatic under-appreciation of what has been and is being accomplished by philanthropy and nonprofits. But if there is one area where foundations (with some notable exceptions) very much deserve to be critiqued, it is with respect to who is – or more accurately who isn’t – on their boards.
The same 2018 BoardSource report I mentioned earlier noted that, of the board members at the 111 foundations that responded to the survey, only 15 percent were people of color. As I wrote at the time the report came out, that’s inexcusable.
Racial diversity isn’t the only kind of diversity that’s missing from many foundation boardrooms: so, too, are boards lacking in those who bring relevant experience at operating nonprofits to the table. Also very often missing are those whose lives have connected meaningfully to – or been affected by – the challenges the foundation seeks to address.
Boards need to ask themselves tough questions about what voices are missing.
- What does the current political moment mean for how we operate?
These conversations about the current federal administration have been happening in some boardrooms, I know, but they need to continue because the context is shifting. The racism and bigotry of the current occupant of the Oval Office should come as no surprise to anyone who paid any attention to his racist attacks on President Obama or to the 2016 campaign. But it’s only grown more raw and is, of course, accompanied by policy initiatives that attack our most vulnerable – from immigrant children to trans people.
This needs to be considered in an ongoing way in light of its implications for foundations’ goals and strategies and the people they seek to benefit. More broadly, the current administration’s agenda has ramifications for nearly every area foundations are working in – not just the obvious ones like climate change or immigration. Foundation boards need to continually assess the implications of this unhinged presidential administration for their work and how that work may need to evolve.
This can feel difficult for boards that seek to steer clear of “politics” – especially when there are a range of ideologies represented among board members. But it’s crucial to power through and have these conversations anyway – because foundation strategies don’t exist in a vacuum.
- How are we hearing from nonprofits and other key stakeholders – including those we seek to help?
Given the rapidly shifting contexts in which foundations are working, boards need to ensure they don’t operate in a bubble. Let me be blunt: any foundation board member who believes grantees and declined applicants are totally candid with them in direct conversations should resign due to a disqualifying lack of self-awareness.
Boards need to recognize the power dynamics between funders and the funded, and take steps to gather candid and confidential feedback through a third-party. That’s the only way they’ll understand what’s really going on. This is always true, but especially important now.
Board members should also seek to understand the views of those who they seek to help. As I have argued elsewhere, many philanthropic failures result from a belief that donors have superior insight into what is best for other people. Board members need to ensure they’re spending at least as much time listening to the people they seek to help as they are to each other or to “experts.” (And, yes, I put myself in the latter category, quotation marks and all.)
As foundations approach the end of summer and look toward their fall board meetings, I hope these five questions will get the time and attention they deserve.
Phil Buchanan is president of CEP, a columnist for the Chronicle of Philanthropy, and author of Giving Done Right: Effective Philanthropy and Making Every Dollar Count, published by PublicAffairs/Hachette. More information about the book is available on givingdoneright.org. Follow Phil on Twitter at @philxbuchanan.