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Challenges – and Opportunities – Facing Foundations Today: A Conversation with Susan Berresford

By Tom Watson on November 14, 2008No Comment

A clear leader in the philanthropic field, Berresford addressed an audience of primarily foundation and non-profit professionals about the opportunities – as well as the challenges – these individuals will face.

Berresford began the discussion by describing new and stimulating developments in the field.  She believes philanthropy is finally getting the attention it deserves and is now being taken more seriously than ever before. It is receiving increased media attention, fueled by large, high-profile donors, such as Bill Gates and Warren Buffett, who have emerged as the sector’s new leaders.  As more young professionals consider careers in philanthropy, the field is also growing from the bottom up.   Both factors are leading to increased competition for talent among foundations, which ultimately will benefit the organizations seeking funds.

In addition, there is a stronger focus on evaluation and communication. Berresford explained that after September 11th there was a large national emphasis on giving; however, in her opinion, communication was handled poorly. It was not clear where the funds needed to go, which resulted in lost opportunity and inefficiency. Now, organizations are doing a better job of effectively communicating how money can be used most efficiently. In other words: there are more philanthropic dollars available and those dollars are going farther than ever before. Foundations are in a position to make a significant impact on the world’s most challenging issues.

After describing the exciting new developments in the philanthropic sector, Berresford outlined the four key challenges that she believes foundations are facing today. These challenges are: perpetuity, the business model, little basis for policy leadership, and the current financial crisis. In order to ensure that foundations can take advantage of the rapid growth and increased communication in the field, they must be aware of these challenges.

She believes that foundations must consider perpetuity when making policy decisions. They must determine what their mission is and what type of issues they are trying to solve. Then they have to structure themselves in a way that will ensure longevity, so that projects can be seen through. She explains that so-called “new philanthropy” is more ambitious and more global than traditional giving has been in the past. Therefore, it has never been more important for foundations to forecast and make organizational decisions that will ensure their sustainability, particularly in the face of cutbacks in government spending.

With the thought of perpetuity in mind, Berresford warned that it can also be problematic for foundations to import a rigid business model for their operations. While she does think that setting benchmarks and goals is important and will result in less operating inefficiency, such measures can also limit the foundation’s ability to achieve its goals.  Rhetorically she asked: “what about issues of social justice, like a civil rights movement?” If the goal is equal rights, then it may be difficult to quantify a foundation’s contributions, even when they are significant. When she reflected on the accomplishments she oversaw at the Ford Foundation, she estimated that about half were planned in the Board room; the other half evolved organically.  The adoption of a rigid business model would not have allowed for that. Many ideas that come from a business model are important, such as transparency and accountability, but she stressed the importance of flexibility for foundations and nonprofits alike.

Berresford also expressed concern that there is a very small basis for policy leadership due in part to the scarcity of data available for decision making. Often, it is difficult to decide which organization to fund because of the ambiguity of their organization’s long term impact. When faced with high administrative costs, it is natural to become more conservative in one’s grants to them. She says that it is necessary to think about the direction of the philanthropic field itself when determining what types of grants to make, and advocates for occasional risk-taking, despite the lack of data available.

Berresford’s fourth challenge – the one on everybody’s mind – is the current economic crisis. No group is excluded from the negative effects of the economic downturn. Endowments are shrinking, individual giving is down and public opinion about the economy is low, which does not bode well for nonprofit organizations. However, Berresford explained that foundations also have a relationship with society and should not merely be seen as a financial resource; therefore, more voluntary work is needed to help the sector endure this crisis. She argues that increased transparency on the part of foundations is vital. Berresford also believes that non-profits should pool resources and apply for joint grants.  Understanding that this will inevitably result in consolidation, she still believes organizations with similar missions will be in a better position to serve the community when they join together. It will also increase the ability for foundations to create grants that will have a positive impact, despite shrinking endowments.

She went on to make the distinction between charities and strategic philanthropy, and argued that both are essential in a community.  Charities, or “traditional philanthropy,” respond to the changing needs within a community.  An example of this type of organization is one that addresses disaster relief. Strategic philanthropy is a planned effort to make investments that will have a coordinated and long-term positive impact on a particular issue. While strategic philanthropy is very valuable, she believes that traditional charities are being trivialized, when both types of philanthropy are required and must work together in tandem to meet the needs of society. When facing an economic crisis, organizations and foundations must decide whether they are undertaking strategic philanthropy or charity work and plan accordingly. Berresford explained that during the economic crisis in the 1970’s, the Ford Foundation decided that perpetuity was a main priority and then adjusted its grantmaking for the long term.

During the Q&A portion of the discussion, she provided some insight into risk-taking. She believes a portion of a foundation’s portfolio should be high risk.   In her experience, some of the most successful grants created at the Ford Foundation were considered precarious when they were originally undertaken.  Many of its great achievements were a result of openness on the part of leadership to award grants to relatively unknown organizations. The strongest example she gave is that of the Grameen Bank; when they originally approached the Ford Foundation, giving small micro loans to women within impoverished communities was unheard of, and deemed incredibly risky. However, due to forward-thinking grant officers, the Grameen Bank was given a grant.  Now, of course, micro-finance has grown and permanently changed the landscape of international development.

Berresford explained that there are many types of risk that a foundation can undertake, including political risk, organizational risk, reputational risk and financial risk.  While it is imperative to manage risk and mitigate damages when a venture fails, it is also essential to understand that a negative outcome every once in a while is okay too.   Her fear is that in an effort to be as accountable as possible, foundations may miss big opportunities for change. 

Berresford concluded the discussion by reiterating that this is a very exciting time in the world of philanthropy. While there are challenges that lie ahead, they can be overcome with perseverance, flexibility, and a willingness to take some risks.

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