U.S. Philanthropy’s Shrinking Ambition, Part IV: The Importance of Grantee Leadership

Posted on 19 May 2009

by Steven Lawry

I argued in Part II of this series that foundations as private organizations are freer than public funders to get behind new and untested ideas for reducing poverty that show promise. Foundations are less subject to the political, economic and bureaucratic orthodoxies that channel public funds and for-profit investments to tried and true approaches that might work in certain contexts but which are not up to the task of helping people get out of deep poverty. In fact, essential changes in public policy and public funding can result from evidence generated by foundation-funded initiatives that doing things differently yields better outcomes.

I then went on to argue in Part III of the series that foundations, by insisting that grantees produce evidence of short-term, measurable impact as a condition for funding, were actually undercutting the very advantages they enjoy as private donors.  Foundations are sanctioned by society to support risky, complicated work—work that often only shows results over the long-term and is not susceptible to easy measurement, but which has the potential of reducing poverty significantly.

Experience has shown that private philanthropic funding is most impactful when grant support is put behind the ideas and work of leaders and organizations outside of foundations.  Communities and local organizations do the hard work of building capacity and knowledge over time.  They and their leaders do the work of holding public and private interests accountable to the needs and interests of the poor.   Their leaders are more likely to know how to bring about change in the myriad institutions that shape policy and allocate public and private resources.

Foundations are not in a position to lead change from the front lines, but they can put resources behind people and organizations that are.  Moreover, foundations, though ideally staffed with people of broad experience and tested judgment, are not think-tanks.  Or put differently, when they try to act like think-tanks, their ideas too often take the form of technical or overly-simple approaches to hugely complicated phenomena.  Foundation staff should rather focus on understanding major social and economic trends and identifying talented change leaders and effective organizations, which should be funded with the fewest possible constraints. 

US philanthropy is stepping away from making full use of its particular advantages to support the innovative and potentially breakthrough work of people who live and work close to problems. 

Managerial cultures are taking hold in some of the large, traditional foundations such as Gates, Ford and Rockefeller.  Increasingly more specific programmatic frameworks in these institutions run the danger of excluding consideration of good ideas that don’t fit their frames. 

The Ford Foundation’s office in Bangladesh did not have a program in financial services when Muhammad Yunus approached Ford staff for funding in the early 1980s.  Rather, Ford had a poverty program that recognized that the country’s poverty problems were vast and acute, and welcomed good ideas from any quarter.  Today, a number of foundations, including Ford, have large microfinance and financial services programs.  But funding for financial services is an almost ubiquitous element of poverty programming in much larger and wealthier institutions, including the World Bank and USAID, and increasingly among commercial lenders.  Foundations made distinctive and arguably essential contributions to the development of the field of financial services for the poor when mainstream donors and commercial banks still thought that poor people were unbankable.  This is no longer the case.  Shouldn’t foundations have their doors wide open to leaders and organizations that are testing new and unexplored ground for reducing poverty, regardless of sector or discipline?

Not enough funding is getting directly to leaders in developing countries who have the situated experience, intuitive insights and qualities of judgment that spawn good ideas, and the patience and local standing to see them to maturity.  The Gates Foundation does not accept funding proposals under its global Agricultural Development and Urban Development programs from organizations that are not registered under section 501(c)3 of the US statutory code.  Gates appears to accept proposals from non-501(c)3 organizations seeking funding from its Financial Services and Emergency Relief programs.  However, as a general rule, Gates does accept proposals not submitted in response to an RfP.  Would the next Muhammad Yunus with a potentially breakthrough idea, especially an idea that does not fit within Gates’ program frame, get a hearing from the Gates Foundation?   It would not be easy.   

While large traditional foundations are over-specifying the solutions to poverty in-house and reducing the possibility that potentially breakthrough ideas get the attention of program staff, new philanthropies, founded by living donors, are bringing another kind of hands-on practice to the field, inspiring a new kind of philanthropy based on promoting  social entrepreneurship.

This movement, despite its embrace of entrepreneurial principles, is failing also to give reign to the leaders and organizations with the best ideas and in the best position to have significant impacts on poverty.  I will return to this topic next week in my final posting in this series, along with some concluding reflections on how philanthropy can embark on a new era of innovation and achievement.