This year marks the centenary of the Carnegie Corporation of New York, the foundation set up by Andrew Carnegie to give away the portion of his fortune he was unable to distribute—despite his best efforts—during his lifetime.
It was not the first foundation to be established but was by far the biggest; its endowment of $125-million (nearly $3-billion today) was twice the combined assets of all the nation’s other big foundations.
Along with the Rockefeller Foundation, created two years later, Mr. Carnegie established an influential model for what a modern, grant-making organization ought to do.
Rather than just providing money for existing projects or organizations, foundations adopting the Carnegie approach have sought to promote broad changes in education, health care, international affairs, race relations, and other causes or to develop new fields and institutions, such as environmental groups, public television and radio networks, and women’s-studies organizations.
With the ability to mobilize money and expertise and to take risks, foundations have viewed themselves as sources of “venture capital” (as many of today’s philanthropists would say) for badly needed social, political, cultural, and economic changes.
In contrast to other forms of giving, the approach of foundations of this kind—which have included the most prestigious in the United States—has emphasized making philanthropy more professional and more effective as a result.
Yet a new report for the Northwest Area Foundation, in St. Paul, raises doubts about the value of this approach.
Titled “Gaining Perspective: Lessons Learned From One Foundation’s Exploratory Decade,” it examines a 10-year, $200-million investment the foundation made to reduce poverty in the eight Plains and Western states in which it operates.
As announced in its 1998 strategic plan, the goal was to make “at least 200 communities” better off within a decade. But rather than awarding money to pilot projects, designed to promote changes in public policy, it sought to develop local groups that would bring businesses, governments, and nonprofits together, under the foundation’s leadership, to solve pressing problems.
That was a bold objective, but not more so than those that ambitious foundations have pursued for a century. However, in this case, the results were disappointing.
The report, which was prepared by the consulting group FSG, concludes that the problem lay with the strategy the foundation adopted.
Although it does not provide many details about what happened in the communities included in the program, the report describes a series of difficulties the foundation encountered, many of its own making.
One difficulty turned out to be with the scope of Northwest Area’s goals.
Even after narrowing its original aim from “seeking to help communities most in need create positive futures—economically, ecologically, and socially”—to merely reducing poverty in those communities, the project still left the organization’s directors and staff—not to mention its potential grantees—with little guidance about what to do.
That could have been an advantage, opening the door to innovation and experimentation.
But instead, this “lack of strategic clarity” (as the report calls it)—and the absence of a coherent “theory of change”—led to confusion, disagreement, frustration, and ultimately the collapse of the foundation’s effort.
A second problem stemmed from the “imbalance in power” between the grant maker and the places—many of which were small and rural—it sought to help.
To achieve its goals, the foundation needed the active cooperation of the people and organizations in these communities, but its control over sizable amounts of money instead created “a sense of dependency” among its grantees.
What’s more, its choices to work with one group rather than another had large financial consequences and invited disputes over which organizations really represented the interests of local communities.
In Yakima Valley, Wash., a community member sued the foundation when it decided not to support the strategic plan that had been developed—despite two years of meetings and discussions.
By the same token, since it was responsible for distributing the money, the foundation had difficulty avoiding the perception that it wanted to impose its own ideas of what should be done rather than being genuinely interested in working as a partner and respecting local views.
Not least important, the foundation faced challenges in monitoring the project. That was partly due to the ambitiousness of its goals, which made evaluation problematic.
But the effort’s boldness and optimism also created a “culture” in which neither foundation staff members nor grantees were eager to “admit that things were not working as intended,” lest the project itself be called into question.
To make matters worse, as the antipoverty program began, the foundation’s board had decided to focus its attention mostly on setting broad policies for the organization and left the details of program decisions and grants to professional staff members.
This governance plan, though widely used in the nonprofit world, meant, the report notes, that the board was not “effectively informed” that its most important commitment was in trouble, and despite the personal connections trustees had to the communities involved, they were unable to provide much help.
In 2008, however, the trustees finally did take a more active role. Instead of designing and running its own programs to fight poverty, the Northwest Area Foundation is now, its president, Kevin F. Walker writes in a foreword to the report, “primarily a grant-making organization,” giving smaller, short-term support to “proven and promising organizations.”
It also says it is listening more closely to people in the region it serves and taking evaluation more seriously. The board is “providing more guidance” to the foundation’s staff as well, the report says.
Those changes amount not only to a reversal of the Northwest Area Foundation’s program but also to a rejection of an approach to philanthropy many other foundations have embraced since the creation of the Carnegie Corporation.
Nor does the Northwest Area Foundation’s experience seem to be unique. Similar reports have been written about ambitious grant-making projects sponsored by the Annenberg, William and Flora Hewlett, Annie E. Casey, and James Irvine foundations, among others.
More generally, according to the contributors to American Foundations, a new collection of essays edited by David Hammack and Helmut Anheier and published by the Brookings Institution, the claims made on behalf of American grant makers have often exceeded what they have really accomplished.
To be sure, not all the gold that foundations have possessed has turned to dross.
But many of the accomplishments credited to them date to an earlier period in their history, when opportunities may have been more plentiful, competition—especially from government—less intense, and the fields in which they worked more responsive to the sorts of efforts grant makers could successfully manage.
Although newly created philanthropies, started by people like Bill and Melinda Gates or Eli and Edythe Broad, may produce a better record, the lesson of FSG’s report is that the real problem may be with how foundations have understood their role in American life.
By seeing themselves as champions of big and bold goals, investors of wealth and expertise, and professionals in social change, they may have created circumstances that make many of their efforts more difficult and less likely to succeed.
