This entry to the One Post Challenge comes from Suzy Meneguzzo. Suzy works at a community foundation based in the Midwest. Her work in the philanthropic sector has included grant making, programming, evaluation and governance.
By Suzy Meneguzzo
I really can’t have it both ways?
A great deal has been written recently about the appropriateness of foundations existing in perpetuity, level of payout and the desired life span of foundations. Arguments seem to run to one extreme or the other: Everything should be paid out now or keep the endowment growing and maintain the 5% payout so that we can continue to work on these problems as the solutions evolve in the future.
It makes me wonder, though, if the discussion shouldn’t be framed differently. Shouldn’t the question be, given the outcome we are trying to achieve (insert mission here); it is most effective if we spend, don’t spend (insert action here)? Isn’t it really about which tactic will accomplish the goal?
I can envision situations in which an “all in” investment makes sense- disease eradication pops to mind. However, I can also imagine funds with goals that lend themselves to existing in perpetuity: empowering girls and young women as an example. The most interesting cases may be foundations with missions and strategies that fall cleanly into neither category.
Working in an organization that supports economic development in a specific geographic area, I can envision an approach that both spends and saves. We might invest 3 million dollars from the endowment in an investment fund here, invest a million in an innovative business concept there, make grants to our communities to support their economic development projects. All of this, while at the same time sitting on funds with an eye for next year’s or next decade’s opportunities.
Perhaps not as clean as a 20 year drop dead date or fattening up that endowment but the environment in which we live isn’t always neat and clean either. And shouldn’t it really be about what we’re trying to accomplish?
Suzy, I think you are dead on target that the spend down debate is missing the point. The point should be how best can a foundation achieve its mission. Spending policies should follow from the needs of the mission.