This entry to the One Post Challenge comes from Dahna Goldstein. Dahna is the Founder of PhilanTech, provider of the PhilanTrack online grants management system for foundations and nonprofits. Prior to starting PhilanTech, Dahna worked for venture philanthropies and as a producer of interactive eLearning programs. She is a member of the board of the I Do Foundation.
By Dahna Goldstein
Thank you for issuing this challenge. I’ve been thinking about these issues for a while, and haven’t been able to make the time to write frequently enough to warrant my own blog. This challenge provided just the push I needed to start writing.
Foundations should be more like public companies. Now before you start arguing that foundations aren’t and shouldn’t be like public companies at all, and before you quickly point to Enron to make your point, let me say two things: (1) the point of the One Post Challenge is to encourage conversation, and (2) I’m going to amend my statement slightly – foundations should be more like good public companies.
If you’re still reading, you either like a good fight, or perhaps you think there might be something to this comparison.
In the interests of time and blog post length, I’m going to limit my comparison to three areas: public disclosure, customer service, and shareholder vs. stakeholder responsibility.
Public disclosure: Public companies are required to make not only quarterly and annual disclosures to the SEC, but also to report any material information. If they disclose good news, they are rewarded for it (generally in the form of an up tick in stock price). If they disclose bad news, they are frequently judged by how well they react to and resolve issues.
Where’s the parallel, you ask? Well, it’s not perfect, but it’s something like this: foundations are required to file 990 PFs with the IRS, but they should disclose more material information – and disclose it more broadly. What made a project or grant successful? What elements of the foundation’s grantmaking or of the grantee’s program are replicable and could be reproduced with similar success in another community, for example? Equally, if not more, important is sharing failures. Some foundations (notably the Irvine and Hewlett Foundations) have begun to do that, and they should be applauded for those efforts. They should also be emulated. By sharing failures and the causes of those failures with the philanthropic community, foundations can help ensure that bad projects, bad initiatives, and (dare I say it?) bad nonprofits aren’t repeatedly funded only to generate the same bad results. On the flip side, they can help magnify the impact of good projects, good initiatives, and good nonprofits.
Customer service: A good company has good customer service. It’s really that simple. Companies need customers. A company with bad customer service loses customers as soon as there is a substitute product available. You might argue that foundations don’t have customers. That perception is a fundamental problem with philanthropy in this country. Foundations are seen – by both the foundation and the nonprofit – as sources of funding, not as service providers. Yes, nonprofits need foundations. But foundations need nonprofits, too. Funding nonprofits (or, more broadly, funding philanthropic and charitable activities) is foundations’ raison d’etre. It is in exchange for that obligation that foundations, charitable trusts, etc. are entitled to be tax exempt organizations. 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. I don’t know too many nonprofits that would switch to another foundation because of bad customer service, but that doesn’t entitle foundations to deliver bad customer service. Some foundations have started to be more responsive to their customer base, as is evidenced in things like the Center for Effective Philanthropy’s Grantee Perception Reports. More foundations need to get on this bandwagon.
Shareholder vs. stakeholder responsibility: Companies have faced significant pressure in recent years to be accountable not only to their shareholders (by maximizing shareholder value) but also to their stakeholders – including their employees and the communities in which they operate (by acting in socially- and environmentally-responsible ways). Many in the philanthropic sector would no doubt agree that corporations should be socially and environmentally responsible. But what does this have to do with foundations? Like public companies, foundations have “shareholders” – their donors (living or not) and their boards of trustees. But they also have stakeholders – members of the communities in which they operate, and society at large. Foundations have a duty to be responsible actors in society, and that has to go beyond simply making grants. This responsibility is heightened when one considers the tremendous public trust that is invested in the success of foundations by virtue of their tax exempt status. Foundations should contribute to growing the field, to building on past successes and failures, to sharing those successes and failures so that others can learn from them, build upon them, and ensure that the public trust is honored. Foundations collect vast amounts of information about how pressing social issues are being tackled – most foundation grants over $10,000 require the grantee to at least submit a year-end report. Those reports, if used well – and if shared with others – could provide significant insights into what is working and what isn’t in addressing social issues. Sharing that information could not only help funders to learn from other funders (from their successes and their failures), but could also help nonprofits learn from other nonprofits. Who else is addressing a similar issue? What is working for them? What isn’t? What lessons can be learned and applied to the problems a given nonprofit is facing and to the social issues it is trying to address? By not sharing candid, detailed feedback about funded programs and grantmaking initiatives, foundations are violating their stakeholder responsibility. Good public companies are now acknowledging that maximizing stakeholder value should be pursued alongside maximizing shareholder value. Foundations should, too.
So what do you think? Should foundations be more like good public companies? If you don’t buy the comparison, why not? If you do, are there other areas in which you think foundations should be more like good public companies?