Foundations & the Contradictions of Customer Service

Dahna Goldstein recently shared with me her essay, titled Foundations Should be More Like Public Companies, which she posted on Sean Stannard-Stockton's Tactical Philanthropy blog as part of its "One Post Challenge".

Dahna, thanks for sharing this piece with me. Allow me to make three (focused but somewhat meandering) comments in response to your writing:

1. Shared Ideas, Various Practices. In general, while I don't know if the overall parallel with public companies works for me, I agree with the type of behavior you seek from foundations. And I think many inside the foundation world would agree as well. In fact, in doing interviews with experience grantmakers about the challenges of foundation professionalism, scholars identified a broad consensus amongst interviewees around the following ideas and commitments:

1. Grantmakers take their responsibility as stewards of other people’s money seriously;
2. Grantmakers believe in promoting and serving the public interest, broadly construed;
3. Grantmakers believe in genuinely respecting grantees and applicants and acting in accordance with this respect;
4. Grantmakers are committed to operating strategically so the grants they make will impact the broader society as well as the direct recipients of services;
5. Grantmakers are committed to funding innovative ideas and strategies; and
6. Grantmakers are committed to some form of honest evaluation and feedback.

However, they found that translating these principles into one set of practices is more challenging than it might seem. In fact, they found contradictory practices stemming from these shared principles. I will quote here at length from their paper, as it is a worthwhile read:

Some [interview] subjects told us that it is "good" for grantmakers to be transparent about project failures. Others told us that "good work" means protecting grant recipients and therefore being circumspect about failed projects and transparency in general. And so, although we have found consensus around core ideals, the notions about best practices to reach these ideals exhibit contradictions and paradoxes.

A number advocate increased transparency in the field for reasons having to do with accountability, evaluation, and increasing the capacity of the field to learn from each other. Ray Bacchetti, formerly of the Hewlett Foundation, asserts that "Grants ought to be like good scientific experiments. Even when they fail, you learn a lot." Bob Long reiterates; "And ultimately, the final piece for me in terms of accountability is that you report what you learned back to that field." Still other subjects support protecting the privacy and autonomy of the field (and grantees) by limiting transparency to what is currently required. Dennis Collins, formerly of The Irvine Foundation, wondered aloud about the ethics of full disclosure to the field in tricky situations. When you have a troubled grantee or project; "To what extent do you engage in full disclosure about the circumstances of a grantee to others?" Controversy surrounds the paradox of transparency.

William Damon and Susan Verducci, CONTRADICTIONS AND PARADOXES IN BEST PRACTICES IN PHILANTHROPY, April 4, 2002, from The Project on Good Work in Philanthropy

2. Reasonable Reasons to Put up Walls? I agree that, as you say, foundations ought to be responsive to the 'stakeholders' of a broader public (beyond their core 'stockholders' - such as trustees). Yet we must acknowledge that sometimes private foundations, and the people inside them, place opaque 'walls' around themselves for relatively good reasons.

For example, the other day a young trustee joined EPIP. She found and joined us by searching the web and using our site, but when I searched for the foundation with which she is affiliated, I couldn't find a website or much information online. When we chatted by phone, I asked her about this. She said her relatives were interested in keeping themselves semi-anonymous, because many of the trustees were younger (even under-20) as the foundation was being established, and their elders did no wish them to face undue pressure from nonprofits and others in the community. Given this story,the Family Business -- as a complex blend of family and business -- provides a stronger corollary than the public company.

The question then becomes: How do we as a field help such understaffed family foundations create basic public accountability for the pseudo-public institutions, while addressing their legitimate family privacy concerns?

Some of the challenge may actually be generational perceptions. Foundation trustees from the Greatest Generation and Baby Boomer cohorts may not be comfortable even using the web themselves, and therefore would not understand how to design or host a site even if they wanted to have one. As new generations of donors and foundation professionals take on leadership positions in the field, I hope they will bring with them a comfort with the accessibility and informative nature of the web, and an excitement about sharing information and collaborating on projects with other foundations and philanthropists.

3. Hey Abbot, Who's Served First?

In your post, Dahna, you write:

Foundations need nonprofits – and need happy nonprofits – just as much as corporations need happy customers. Grants are a product of philanthropy, and nonprofits are the customers.

Here is a different point of view. Foundation president and philanthropic scholar Michael Lerner (not the well-known rabbi by the same name) writes at one point in his book, A Gift Observed:

The real client or customer is the foundation. The nonprofit is the vendor seeking to make a sale to the client.

This offers an important counter-narrative to the market equation analogy that you and others have proposed.

You are right that foundations would not have much to do without the organizations to fund. But foundations often act more like investors with their own missions - the organization in which they invest are the implimentors of that vision. In a sense, the foundation-customer may buy or contract-out the work they want to see happen to the nonprofit-vendor that they think can best make it happen.

Thus if we think of foundations as stake holders or stockholders in the nonprofits in which they invest to achieve their missions, what is the role of stakeholders and stockholders? To hold companies accountable for governance, legal practices, productivity, and achieving work toward mission. Not customer service. And not transparency.

I am not in any way endorsing this as the optimal model for foundation-nonprofit relationships. But I think Lerner provides a model for the actual operating principles by which many foundations behave today, rather than an idealized concept. Working from this realpolitik point of view may be most productive as we strive to shift the a power dynamic between foundations and nonprofits that is more balanced, ethical, and healthy for communities.