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Beyond the Rhetoric Foundation Strategy

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Beyond the Rhetoric Foundation Strategy Beyond the Rhetoric: Foundation Strategy Authors Acknowledgments Kevin Bolduc We are very grateful to the 42 CEOs and program officers interviewed Ellie Buteau, PhD for this study. This work would have been impossible without them. Greg Laughlin The authors would like to thank CEP’s staff for their advice and support, Ron Ragin especially Phil Buchanan, Alyse d’Amico, and Lisa R. Jackson, PhD, whose contributions to the analysis and writing of this report were substantial. Judith A. Ross We are also grateful to the members of our Advisory Board and Board of Directors, whose input helped us create a better report. In particular, we For more information, are grateful to the members of our Foundation Strategy Study Advisory contact Committee, a subset of members of our Advisory Board and Board of Directors, who advised us on research design and analysis. See the Kevin Bolduc back cover for a full list of individuals. Vice President, Assessment Tools 617–492–0800 ext. 202 A special thanks to the Gill Foundation and Doris Duke Charitable [email protected] Foundation for allowing us to highlight their work. We are very appreciative of the grant support that made this work possible. Thanks in particular to the Surdna Foundation, which provided support for this project. This work was also supported by general operating grants from CEP’s major funders, including the William and Flora Hewlett Foundation, the Robert Wood Johnson Foundation, the Edna McConnell Clark Foundation, and the Bill & Melinda Gates Foundation. See the back cover for a full list of CEP’s foundation funders. This paper is based on CEP’s independent data analyses, and CEP is solely responsible for its content. This report does not necessarily reflect the individual views of the funders, advisors, or others listed above. CEP is a nonprofit organization focused on the development of comparative data to enable higher-performing foundations. For more information on CEP’s research and to download or order copies of this and other CEP reports, please visit www.effectivephilanthropy.org. Table of Contents Executive Summary . 2 Introduction . 4 Overview of Research Design . 7 Key Findings . 9 The Four Categories of Decision Making . 11 Key Trends Among Categories . 16 Implications . .19 Future Research . .21 Case Study: The Gill Foundation: Taking a Strategic Approach to Philanthrov . 22 Appendix: Methodology . 25 CEP has created a Web site with more information on our Foundation Strategy Study, including audio and video segments that exemplify the four decision-making categories we describe . Please visit strategy effectivephilanthropy. org. Executive Summary Foundations are unique in our society . While other foundation’s ability to create impact, many do organizations face competitive dynamics or fundrais- not use strategy in their own work . We asked ing imperatives, endowed, private foundations feel no respondents to describe the frameworks they use such pressures . to guide their decisions . While some decision- making frameworks met our basic definition of To many in the foundation world, this freedom is strategy, a majority did not . foundations’ greatest strength, allowing them to tackle social issues other societal actors — such as When determining whether respondents used strategy business and government — will not . To critics, it is to guide programmatic decision making, CEP applied their greatest weakness because there are few checks the following definition of a strategy: on the decision making of foundation leaders and no forces compelling foundations to be effective and strategic . A framework for decision making that is 1) focused on the external context in which the foundation works and Given foundations’ unique situation, what drives their 2) includes a hypothesized causal connection between decision making? To what extent are foundation CEOs’ use of foundation resources and goal achievement. and program officers’ decisions guided by strategies? The Center for Effective Philanthropy (CEP) has Our analysis uncovered four categories of decision sought to learn how foundation CEOs and program makers that range from nonstrategic to strategic: officers view strategy: Do they believe it is important for foundations? Are they guided by strategies when making decisions about using their financial and nonfinancial resources to achieve goals? If not strategy, what does guide their decisions? Charitable Bankers do not use strategy . They mention their external context only when citing their goals, We invited CEOs of 50 randomly selected private not when describing how they will achieve those foundations among the largest 450 in the United goals . They describe decision making solely in terms States to participate in our study . Twenty-one chose of processes for reviewing, making, or denying to participate and allowed us to interview them and individual grant requests . a program officer at their foundations, yielding a sample of 42 respondents . Both CEOs and program officers were queried about goals, decision making, development of strategy, internal consistency, and assessment . We then systematically analyzed Perpetual Adjusters use strategy very infrequently . Most their responses . decision-making frameworks they describe are not strategies . They frequently mention processes they • We learned that even though most of the CEOs use to review or revise goals and decision making . and program officers interviewed believe They typically note many options for focus, decision that having and using a strategy increases a making, activities, and processes . 2 Beyond the Rhetoric: Foundation Strategy Key Findings • All respondents talked about their goals primarily in terms of creating external Partial Strategists use at least one strategy to guide their social impact . decisions, yet for many of their other decision-making frameworks, they do not articulate hypothesized causal • Respondents believe that strategy provides connections between use of foundation resources and significant benefits to private foundations, goal achievement . and they overwhelmingly describe the use of strategy in positive terms . • Although respondents acknowledge — and often extol — the advantages of having a strat- Total Strategists are highly strategic . They use externally egy, the majority of frameworks they describe focused frameworks for decision making that have a do not meet our basic definition of a strategy . hypothesized causal connection between foundation resource use and goal achievement . • Four distinct categories of decision makers emerged from our analysis of individual CEOs and program officers from the same respondents’ descriptions of their decision- foundation frequently do not fall into the same making frameworks . category because they describe approaches to decision making that are different . About half, however, did • Respondents from the same foundation land in the same decision-making category as their frequently fall into different decision-making foundation counterpart . Overall, neither CEOs nor categories . program officers tend to articulate a more strategic decision-making approach . Our findings suggest a fundamental disconnect between what foundation CEOs and program officers believe about the importance of strategy and their use of it in their daily work . To the extent that those we interviewed are correct that strategies are important for maximizing impact, this finding suggests that Our findings suggest a fundamental foundations are not reaching their full potential . This gap between what CEOs and program officers disconnect between what foundation say they believe and what they actually do poses an CEOs and program officers believe important challenge for foundation leaders . Although this study focuses on respondents from about the importance of straten and large, private foundations, we hope that the findings their use of it in their daily work. will provoke reflection and discussion among leaders of small, community, and corporate foundations as well . In future phases of our work, we hope to deepen and broaden the analyses we have conducted on private foundations and to expand our work to study commu- nity and corporate foundations explicitly . The Center for Effective Philanthropy 3 Introduction Corporate CEOs, electoral candidates, and sports appropriate alignment of internal resources — can also coaches use strategy to create shareholder value, help nonprofits succeed in generating contributed and prevail in elections, and win championships . In fact, earned revenue and in attracting volunteers 2. strategy is widely seen to be an integral part of any team achieving its goals — whether that achievement Endowed private foundations are a different breed happens at the stock exchange, in the voting booth, or entirely . They do not face resource-generation on the playing field . Should foundations — working to concerns or competition, and so there is no external achieve important goals related to the improvement of imperative that compels the development or modifi- our society — be any different? cation of a strategy . The freedom these foundations enjoy is arguably their greatest strength because it Many leading corporate strategists argue that develop- allows them to take on issues that other societal actors ing a strategy based on “unique positioning” within cannot, or will not, address . Foundations that meet the external environment is crucial to success in a minimum payout and other basic regulatory require- competitive
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