News and analysis
October 28, 2015

Kresge’s Focus on Solving Big Problems Shows Promising Signs, Watchdog Says

The Kresge Foundation’s effort in the past decade to move away from making grants for buildings and other capital projects — and instead focus on supporting groups that curb poverty and climate change — is showing signs of success, says a report released today by a charity watchdog. But the foundation would achieve more by increasing its payout, adding staff members, and relinquishing some of the control it seeks to exert over grantees.

"The foundation has carved and continues to blaze a path toward lasting social-justice impact," according to the report, which was produced by the National Committee for Responsive Philanthropy as part of its Philamplify series of grant-maker studies.

The study about Kresge, the 15th-wealthiest foundation in the United States, sought to gauge what progress the institution had made since 2006, when it announced it was moving away from capital grants.

"They’re sort of in their adolescence with this new strategy," said Lisa Ranghelli, the committee’s director of foundation assessment. "It’s a good time to take stock and see how they are doing with the nuts and bolts of that process."

More Spending Urged

To reach its conclusions, the center combed through Internal Revenue Service filings and media clips, interviewed Kresge beneficiaries and people at other organizations who have worked with the foundation, and extracted data from a 2014 report on grantee perceptions that was produced by the Center for Effective Philanthropy.

The Troy, Mich., grant maker, which has $3.67 billion in assets, cooperated with the researchers as they prepared their report and did not offer significant changes to the draft they were shown, according to Ms. Ranghelli.

Philamplify said a key way the foundation could improve its effectiveness would be to increase its payout rate to 6 percent. With the exception of 2009, when it paid out 6.3 percent of its assets, Kresge’s payout rate in recent years has hovered around the federal minimum of 5 percent.

In other highlights, the report:

  • Praised Kresge’s "highly skilled" staff but said grantees believed program staff were stretched too thin and hence were unresponsive.
  • Applauded Kresge for contributing $100 million to a "grand bargain" among city officials, philanthropists, and creditors designed to bring the city out of bankruptcy but noted that many grantees involved in that work reported that the foundation exerted too much control. The result, suggests the report, is that Kresge’s involvement amounted to "philanthropic coercion rather than generosity."
  • "In Detroit, we saw a little bit of tension and a perception that they were top-down," Ms. Ranghelli said. "That stood in contrast to every other program area at the foundation."

  • Recommended that the foundation divest its holdings in oil and gas companies and earmark at least 25 percent of its endowments for investments that complement its grants strategy.
  • Enhance its commitment to expanding opportunities for low-income people by explicitly addressing racial discrimination in its grant-making programs.

Pledges From the Foundation

In a letter to the National Committee for Responsive Philanthropy Rip Rapson, Kresge’s president, outlined several steps the foundation has taken to try to address some of the areas ripe for improvement.

For instance, in September the foundation said it would devote 10 percent of its endowment to investments that help it achieve its mission.

The foundation is developing a "comprehensive set of responses" to the Center for Effective Philanthropy’s grantee-perception survey, he said, that will be designed to improve how it works with its beneficiaries. To deepen its understanding of the effectiveness of its grants, the foundation has created a new position: director of learning and evaluation.

In Detroit, the grant maker will increase its support of smaller, "neighborhood-scale" investments, he said, and expand its efforts "to ensure inclusive and comprehensive economic recovery."

Send an email to Alex Daniels.