US institutional foundations’ declining share of overall philanthropy, like an outgoing tide, has exposed significant problems in the way they operate. When we examined our interviews with more than a dozen foundation leaders, The Bridgespan Group’s numerous client engagements with large foundations over the last several years, and our synthesis of our research and that of others, we consistently identified the same set of operating norms as barriers to foundations achieving their impact aspirations.
Fragmented giving: Most large foundations spread their giving over a sizeable number of issue areas. Among the 50 largest US foundations, the median number of issue areas in which they invested in 2014 (the most recent data at the time of our analysis) was 10. Even in its largest giving area, a large foundation’s giving is a median of just 3 percent of all foundation giving in that area. A handful of the largest foundations do have a substantial market share in their areas of greatest interest, but for the typical large foundation, its giving represents only a drop in the overall philanthropic bucket, even in its area of greatest investment. Grant sizes are typically fairly small and spread across a large number of grantees. Those same 50 foundations, which gave away a median of $120 million in 2014, funded a median of 265 grantees that year, with a median annual grant payout of approximately $180,000.
Rigidity in budgets and structure: As opportunities for impact emerge, large foundations often find themselves challenged to respond. Foundation executives report being frustrated by the lack of budgetary flexibility to make big bets, especially if they fall outside or across existing program areas. Foundations typically have relatively fixed annual budgets allocated across a set of program areas. Usually portfolios are managed by a program officer, each with many grantees (a median of 36 in large foundations). This structure of program areas and portfolios creates a sort of natural rigidity.
Being overly prescriptive about strategy: While there are times when foundations do (and should) manage detailed initiatives of their own creation, philanthropy is generally about underwriting the work of others outside the foundation. Yet, the structure of many large foundations can make it hard to invest heavily in strategies that do not come from the foundation and its program staff or that do not have the foundation at the center.
In recent years, we have seen several traditional foundations make dramatic breaks from past ways of work. Some are doing so by moving towards a big-bets approach and committing significant resources to tackling a well-defined problem. We define big bets not merely as one-shot large grants, but commitments that require focus on a targeted set of outcomes connected to time-bound milestones, as well as identifying a set of leaders who are entrusted with these outcomes. Big bets can be driven by one philanthropy or by a collaborative venture; similarly, they can be granted to one organization or many.
Setting time-bound, right-sized goals: While ambitious, long-term goals should continue to offer compelling north stars, pairing these aspirations with clear, measurable milestones and “right-sized” resources enables leaders to understand how their strategies are faring and where they may need to adapt.
Building in flexibility to concentrate or shift resources: Foundation leaders are also using a variety of ways to build in flexibility. One strategy is to disrupt programmatic silos.
Ceding control of strategies: There will always be a place for foundation-driven strategies. But a number of foundations—impressed by the extraordinary vitality and strong track records of some of the sector’s strongest organizations—are listening harder to what is happening in the fields in which they work and giving more creative control to grantees, donor collaboratives, and other stakeholders such as policymakers and researchers and even the beneficiaries they aim to serve.
Read the full article about reimagining institutional philanthropy by Alison Powell, Willa Seldon, and Nidhi Sahni at The Bridgespan Group.
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