Foundations Must Rethink Their Ideas of Strategic Giving and Accountability

(Chris Gates is executive director of Philanthropy for Active Civic Engagement, and Brad Rourke is a program officer at the Charles F. Kettering Foundation. This article is adapted from their organizations’ new report “Philanthropy and the Limits of Accountability: a Relationship of Respect and Clarity,” which will soon be available free at pacefunders.org. This blog post was originally published on The Chronicle of Philanthropy blog.)

People used to defer to experts who knew things that “we” didn’t. But now, with the swipe of a finger or a keystroke, anybody can become instantly informed about nearly any topic. Citizens everywhere have demanded more voice, more inclusion, and more information in every aspect of their lives, and in many cases they have received it.

While the media, politics, government, nonprofits, and businesses all have strived to meet the new demands of these hyper-connected times, one part of society has until recently remained nearly immune from such pressure. That is organized philanthropy.

For decades, foundations have done their work with little pressure to make their operations more open and understandable. Boards have been free to make decisions behind closed doors about what areas they will focus on and what projects and organizations they will fund. These institutions have largely done their work out of the glare of public review from the time of their founding.

It was as if, because by definition philanthropy is about “doing good,” the practice of philanthropy escaped widespread public scrutiny.

But that set of assumptions has been changing. Pressures for increased accountability—the same ones that have affected so many other sectors and to which philanthropy has so far seemed immune—are increasing.

Partly as a result, more and more foundations are moving toward an approach of “strategic philanthropy,” in which their board and staff members develop a policy or agenda for desired outcomes and then a specific plan to pursue it. It seems that fewer and fewer accept unsolicited, “over the transom” proposals.

Foundations are now engaging in public problem-solving efforts in ways that Andrew Carnegie and John D. Rockefeller probably never imagined, sparking a lively debate about how “public” or “private” foundations are or should be. Grants are now sometimes detailed portfolios of work that have been developed by the foundation, with a nonprofit beneficiary serving more as a contractor than a grantee.

What all of this means is that philanthropy is increasingly under a microscope.

To better understand the pressures, our organizations—Philanthropy for Active Citizen Engagement and the Kettering Foundation—have spent a year exploring these issues with foundation and nonprofit leaders.

Here are the main findings from our forthcoming report, which will be released later this summer, and some questions suggested by the findings that we think philanthropy ought to consider.

Philanthropy is at a crossroads as it experiences increased pressure from all sides to solve public problems and to be more accountable for outcomes.

Foundations have few external pressures beyond basic requirements imposed by government, yet people in philanthropy often say they feel besieged, exhibiting almost a bunker mentality.

Grantmakers and nonprofit leaders point to many efforts at different levels of government that they see as threatening their ability to do their “good work”: federal calls to raise the payout requirement above the current 5 percent of assets; local efforts to tax foundation assets in new ways; threats of creating a “hierarchy of need” that might allow groups that serve the poor, for example, to offer better tax breaks for donors than other causes.

This is all in part because, increasingly, philanthropy is beginning to occupy a space that goes beyond the supplemental role it has traditionally played in public life. More and more, foundations are stepping in to play a role that was previously the exclusive purview of the government.

Such public activities are difficult or impossible without a working relationship with citizens. How do institutions that consider themselves “private” find ways to constructively engage with the public? The more they occupy this public space—and are seen as responsible for doing so—the more foundations must consider how to engage the public in their decision-making and priority-setting processes.

Philanthropy should ask itself: What are our responsibilities as institutions with a growing public role?

Transparency may be a necessary component of accountability, but it is not sufficient and too often may be obfuscating.

One way institutions try to demonstrate accountability is through transparency. This is especially true in an environment of distrust in which the very motives of institutions are suspect. Sunlight is a critical disinfectant. But there are problems, too.

Relying solely on transparency places the burden of responsibility on the public. The public must spend time and effort to seek out and then make sense of the information being provided. People may rightly see these large troves of data as obfuscating, using transparency in a Machiavellian way to decrease accountability.

The idea that transparency by itself is just not helpful is increasingly the view of people who work in philanthropy and at nonprofits. Clarity and context must also play a role—for instance, by not just opening up raw data stores but also providing tools to make sense of what they mean.

Philanthropy should ask itself: How can we add clarity and context to transparency?

Strategic philanthropy may paradoxically tend to make philanthropic organizations seem less accountable and more risk averse.

Foundations mostly give money to organizations and people who, they hope, will achieve the changes they want to see in the world. Many foundations, seeing intractable problems in communities, are trying to structure their grantmaking to aim for clear and measurable results, or metrics. This is to the good. Why do something if it won’t achieve some impact?

But as foundations try to show more impact, their actions can appear unilateral and unaccountable. Foundations are increasingly choosing, and even implementing, solutions themselves, as opposed to responding to the ideas of others.

Philanthropy should ask itself: What is our real responsibility for showing impact? How much can or should we control?

Accountability isn’t just about data transparency. It’s also about relationships.

Research suggests that there is a gap between the institutional view of accountability and what citizens mean when they think about it. Institutions see accountability as a requirement to show effectiveness and impact. But citizens want to feel that they can trust institutions and that they are in some sort of relationship together.

Participants in the research for our report called for an approach to accountability that is rooted in respect for the role of the public and that seeks to provide clarity about what institutions are trying to do and why they are trying to do it.

Philanthropy should ask itself: How can we improve our working relationship with citizens and demonstrate respect?

This, then, is the conversation that philanthropy must join: How are we redefining our role in addressing the public agenda? How can we improve our working relationship with citizens and demonstrate respect? How do we work with other sectors in a collaborative way?

It is tempting to create a binary good vs. bad framework. There’s “good” transparency and “less good” transparency. But that’s too simple and wrong. Transparency is good. Accountability is good. Impact is good. Strategy is good. They’re all just complicated.

But as philanthropy responds to the changed world and its emerging new role, it would do well to look for ways to embody all those things, mindful also of the fundamental relationship of respect and clarity that the public expects.

No longer can philanthropy sit out of conversations that go to the very core of the reason it exists. It’s time to engage.

-- Chris Gates and Brad Rourke