The Kresge Foundation, whose $3.2-billion endowment has dropped 20 percent from its 2007 high, is trying to do more with less.
The foundation’s latest effort to help its troubled home city, Detroit, is a good example of how Kresge seeks to expand its impact, even if it can’t increase its grant making.
Rip Rapson, the foundation’s president, announced in January that Kresge would spend $150-million over the next five years to help Detroit carry out plans to transform itself.
That’s about how much Kresge is already spending in Detroit through various grant-making programs, but Kresge also plans to make program-related investments in the city—contributing as much as $10-million to a fund that will help aspiring homeowners in Detroit qualify for loans.
“The $150-million figure may end up being conservative,” Mr. Rapson says.
A New Set of Tools
The Detroit effort is just one example of how Kresge is stretching to get more from its programs, staff, and endowment at a time when dollars are tight.
Kresge is also investing in advocacy, with grants to charities that lobby on issues that it cares about, such as community health care and climate change. And Kresge has expanded its budget for program-related investments to $13.5-million, about 10 percent as much as it spends on grants each year.
It has budgeted another $13.5-million for “credit enhancements”—a way of lowering borrowing costs for grantees by guaranteeing their loans with the foundation’s strong credit profile.
And it has hired a recent Harvard Business School graduate to spend a year poring over the foundation’s investments, to identify holdings in companies whose business activities may run counter to the foundation’s mission.
“What we’ve increasingly tried to do is determine the nature of a problem, and then array as many tools as we can,” Mr. Rapson says.
The strategy, he says, is in some ways a response to the “chaotic, ambiguous, and uncertain times”—in other words, times in which preserving the grant-making power of an endowment is no longer certain.
New Strategy Chief
Kresge’s attempt to make better use of its grants and assets is just the latest step in the foundation’s transformation. Until 2007, the grant maker was known almost exclusively for using matching grants to help charities in Michigan and elsewhere raise money for construction and renovation projects.
Coordinating the new strategies is complicated enough to require a management consultant—so Mr. Rapson hired one.
Ariel Simon, who previously worked for McKinsey & Company’s advisory unit to nonprofits, became chief strategy officer and deputy to the president in February.
The new position, says Mr. Rapson, is crucial to helping Kresge “move out of a long history of working in a certain way with a single tool to a more multifaceted way. It’s important we try to create coherence among these disparate pieces.”
Healthy Futures
Mr. Simon will help oversee the foundation’s investment in the Healthy Futures Fund, a $100-million joint effort with Morgan Stanley and the Local Initiatives Support Corporation that was announced in January.
The fund, an effort to assist low-income people who may soon gain health insurance under the new health-care law, will create 500 housing units and eight federally qualified health centers that will serve 75,000 people.
The effort will benefit from federal tax credits, and Kresge is supporting the project with grant money as well as loans made by its arm that handles program-related investments.
Adjusting the Formula
Kresge also has changed the formula for setting its grant-making budget, to reduce volatility when the markets are in flux.
Now the budget can’t be any more than 5 percent higher or lower than the previous year, though Mr. Rapson says the foundation may fudge that a bit if the stock market turns in another strong year in 2013.
“When we were in constant growth mode, the relative stability wasn’t as important,” Mr. Rapson says. “But when the endowment is going up and down, and down and up, it struck us that it was important to be as constant for grantees as we can.”
Maria Di Mento contributed to this article.