Foundation Effectiveness

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All too often, foundations have failed to institutionalize a process to establish standards of effectiveness and regularly assess themselves in relation to these standards. We draw this conclusion from a series of interviews with 61 foundation leaders (CEOs and board heads) of 42 staffed, grantmaking foundations.¹ These interviews probed foundation leaders' understanding of effectiveness, the methods they use to judge it, and how they say their foundations have changed or need to change in order to be more effective. As the following discussion shows, what is clearly needed in so many cases is for foundations to articulate specific understandings of effectiveness in relation to their own institutions, to remain attentive to these, and to ensure that they have a regular process in place by which to assess themselves in relation to the effectiveness approach they have chosen.

The interviews discussed in this report are part of the larger Attitudes and Practices Concerning Effective Philanthropy study, conducted by the Urban Institute and funded by the David and Lucile Packard Foundation in partnership with Grantmakers for Effective Organizations. Earlier study publications reported on findings from a mail survey of 1,192 staffed foundations. A sobering conclusion from that survey was that many grantmakers are not engaging in practices that, according to their own standards, are important for effectiveness. The interviews analyzed here further document that important practices are not being undertaken and reveal that all too often foundations have not made an institutional commitment to scrutinizing whether or not their practices match their stated beliefs.

Still, we found that many foundations are interested in issues of effectiveness, and this is likely one reason that fully 70 percent of all foundations asked to participate in this interview research agreed to speak with us (note that these foundations were randomly sampled).

The following pages demonstrate that:

• Foundations typically define "effectiveness" in broad and general terms (e.g., good grantmaking, attaining goals) and considerable variation exists among grantmakers.
• In order to make effectiveness a priority, many foundations need to clarify and specify what they believe it means to be effective. There are multiple approaches to effectiveness, and foundations need to choose one that is appropriate for themselves—but they must be clear about the choice they make.
• Often the major challenge to achieving effectiveness is that: a) effectiveness goals are overshadowed by other priorities, or b) certain dimensions of effectiveness being pursued by the foundation are not compatible with its other effectiveness goals.
• Many foundations need to develop, formalize, and expand their methods for determining whether or not they are meeting their standards of effectiveness. This is not to be confused with current widespread calls for quantitative measures, as useful as these measures may sometimes be. There is a tendency to attribute lack of self-assessment to an absence of hard measures. But this study emphasizes that a bigger obstacle to achieving effectiveness and measuring progress toward it is that all too often foundations have not clarified what they mean by effectiveness. Absent a clear conception of effectiveness, foundations cannot assess (quantitatively or otherwise) whether or not they have achieved it, and risk adopting measures first and then adjusting their conceptions of success to fit the measures.
• When it comes to difficulties in defining and achieving effectiveness, foundations that are otherwise quite different, with respect to size and type, often face quite similar challenges.
• The problem of defining and achieving effectiveness for foundations is deeply shaped by their unique insulation from external forces. Unlike businesses and many other types of nonprofits, foundations will not go out of business if they fail to sell a product or attract clients. This means that foundations can function ineffectively with little external feedback or consequences. Accordingly, foundations must find ways to obtain fresh perspectives and objective data on their performance to serve as a "reality check" on their own perceptions. Note that community foundations do have to attract donors, and thus are uniquely dependent on an external audience. While this promotes accountability to numerous individual donors who have specified particular wishes concerning the use of their donations, this is not the same as having a process for dealing with the overall effectiveness of the foundation as an organization.

The Attitudes and Practices study did not start out with a predetermined definition of effectiveness, but sought to understand what effectiveness means to foundations themselves. Likewise, we made no assumption that there is any single way to define effectiveness that is suitable for all foundations and have elsewhere detailed the often dramatic differences in approach taken by foundations of different sizes and types. It also became clear that there are major effectiveness issues in the field that are common to foundations of varied types and sizes, and that is illustrated in this paper.

That said, there is one important component of our focus and boundary to this study that should be stated explicitly—namely that the very use of "foundation effectiveness" as a framework for analysis implies that, at least at some level, foundations are conceived as having (or are trying to formulate) distinct organizational identities, policies, and operations. The foundation effectiveness framework is not applicable to some foundations that conceive of themselves not as organizations at all, but as instruments or extensions of individual philanthropy. For instance, one interviewee said that his foundation defines effectiveness as giving large sums to institutions of interest to the donors' family, and is "as close as you will get to an incorporated rich woman or rich man ... or in this case, two or three individuals' philanthropy." We encountered only a small number of such foundations, probably because we only studied foundations with at least one staff member (even if that staff member was only part time). Most foundations in the United States have no staff and it is likely that many of these are also extensions of individual philanthropy. Our organizational framework of analysis is not applicable to those foundations, which are more appropriately analyzed from the perspective of individuals' philanthropic effectiveness, including whether or not using a foundation as a vehicle enhances or detracts from effectiveness. This is a very important area for analysis, but it is one that is outside the scope and data of this study. It is very important as well that those who discuss "foundation effectiveness" recognize that the organizational terms in which they typically speak will not resonate with a vast number of foundations in this country, and, if they do want to reach those institutions, they will need to pursue a separate strategy.

A striking finding of our study as well, however, is that the "organizational" versus "extension of individual" philanthropy distinction does not mechanically map onto the small versus large asset size difference among foundations, or onto the family versus professionalized foundation distinction, although these are clearly related. We spoke with small foundations that had quite clear conceptions of institutional mission, while the foundation described above as an extension of individual philanthropy is quite large. Moreover, we spoke with family foundations that were deeply concerned to make the foundation an effective organization with professional and structured operations and a clear mission, even as these reflected family priorities. In some cases, foundations were a hybrid, such as one that divided its giving so that part went to institutions of interest to the donor while part was done through programmatic guidelines and review processes. Thus, even when focusing on foundations conceived of as organizations, those concerned with foundation effectiveness will also need to incorporate the individual and personal side of philanthropy into their thinking, because for many foundations finding a way to meld organizational operations and family values and dynamics are key to creating effective foundations.

Notes from this section

1 In nine foundations, the CEO and head of the board were the same person. In 17 other cases, we interviewed the CEO (and in one case, two co-CEOs) and the board head, and in an eighteenth case we spoke to the daughter of the head of the board (who was also a board member) and the CEO. In the remaining 15 cases, we obtained interviews solely with the CEO.

Of the 42 foundations, 13 had assets of under $10 million, 15 had assets between $10 and 50 million, and 14 had assets in excess of $50 million. By region, nine were from the Northeast, 11 from the South, 13 from the Midwest, and nine from the West Coast. By type, 28 were private independent foundations (of which 17 were family foundations), eight were community foundations, and six were corporate foundations.

Note: This report is available in its entirety in the Portable Document Format (PDF).

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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