When Fay Twersky and I started in our roles with the Hewlett Foundation’s Effective Philanthropy Group (in 2012 and 2013 respectively), we heard again and again that there was less funding available for infrastructure – the essential tools, networks and supports that foundations and nonprofits need to improve their practice – than there used to be. Many we spoke with asked if we would increase our infrastructure funding budget.
These requests were one key reason we helped launch a collective funding effort, the Fund for Shared Insight, to gather and focus funding on supporting learning and improvement in the philanthropic sector. But they also got us thinking about the data on infrastructure funding. We work regularly with other infrastructure funders, but we wondered if we had a complete picture of the funding environment. Was infrastructure funding really decreasing, and if so, to what extent?
To answer the question, we commissioned the Foundation Center to analyze nearly a decade of their FC 1000 dataset (2004-2012), which includes grants of $10,000 or more awarded annually by 1,000 of the largest private and community foundations in the United States. The report examines the grants in the dataset that are explicitly for nonprofit and philanthropic infrastructure support. Notwithstanding some limitations in the dataset, we have learned a lot from this analysis. We plan to support the Foundation Center to update the report with 2013 and 2014 data next year. You can find the full report on the Foundation Center’s website, and read a blog post about it by Foundation Center Director of Research, Steven Lawrence, as well. The report is openly licensed under Creative Commons because we hope others will use it in ways that support their work.
Here are some highlights from the report:
Funding dips and rebounds. U.S. foundation support for nonprofit and philanthropic infrastructure totaled over $1 billion between 2004 and 2012. Funding has fluctuated over that period, reaching a high of $136.2 million in 2006 and dropping to $100.6 million in 2010 after the recession. In 2012, it was $134 million – nearly back to the high water mark of the period studied in this report. So it’s not surprising that grantees were reporting to us in 2013 that there was less funding for infrastructure – it was still rebounding from the lows seen after the recession. We will need a few more years of data to see if the upward trend since 2010 continues.
Funding for Nonprofit and Philanthropic Infrastructure, 2004-2012 Source: Foundation Center FC 1000 dataset
Philanthropy is growing, but infrastructure funding isn’t keeping pace. While the total dollar amount of infrastructure funding is nearly back to 2004-06 levels, infrastructure funding hasdecreased as a percent of total giving because overall giving has grown during the period. In 2004-2006, infrastructure funding was 0.65-0.85% of total giving – but then it dropped for five straight years to under 0.60%, and only got back to 0.60% in 2012. Not only has giving increased over the last decade, but the number of foundations and nonprofits has grown substantially as well. There were 66,000 foundations in 2004 and there are over 100,000 today (Foundation Center). The number of public charities grew 29.6% in the decade since 2002, with 963,243 registered public charities in 2012 (National Center for Charitable Statistics). This means there are many more foundations and nonprofits to use and engage in the infrastructure and many new organizations on one of the steepest parts of the learning curve.
Funding is relatively concentrated, though some shifts are occurring. In 2004, the top five funders accounted for more than half (53%) of all infrastructure support from the FC 1000. By 2012, the top five funders accounted for just 32%. On the recipient side, funding has actually concentrated, with the top five recipients receiving 32% of total support in 2012, up from 24% in 2004.
So what does this all mean?
First of all, it does not mean that organizations appearing in this report – the top five or even the top 20 – don’t need additional support. They all have significant goals and need our continued (and increased) support to do the work they do. Organizations not appearing on the list do as well.
For funders who support infrastructure, we hope this report offers you a more detailed context in which to orient your funding.
For nonprofit and philanthropic infrastructure organizations, hopefully this data puts your experiences with funding into context and helps as you plan for the future.
And for foundations not yet supporting infrastructure in a significant way, we need you! Consider what organizations help you strengthen the work you do and the work your grantees do, are aligned to your approach, and/or whose work you value and fund them. Funding has to keep pace so that our sector’s infrastructure organizations can continue to help us all improve our work.
Many funders say they have found it challenging to collaborate with other funders in deep, ongoing efforts. Those who seek to collaborate lament the hurdles they need to overcome: each foundation is so independent, singularly focused on its own goals and strategies, and unwilling to be flexible, even when it might mean a better chance of addressing daunting problems. Indeed, our own president has spoken about his experience of trying to foster greater collaboration. For funders who overcome these barriers, it can be a laborious process to get everyone on the same page to work together—time-consuming groundwork, waiting for various funder decision timelines to align, and so forth. But there is real power in successful collaboration, and there are examples where it has worked well. So when Fay Twersky and I began to explore a collective funding effort last year, we held these cautions in our minds yet were determined to overcome them.
Last month, seven funders officially launched Fund for Shared Insight—a collaborative effort to help strengthen and improve philanthropy focused on increasing foundation openness in service of effectiveness. This group of seven includes the David and Lucile Packard Foundation, Ford Foundation, JPB Foundation, Liquidnet, the Rita Allen Foundation, the Hewlett Foundation and the W.K. Kellogg Foundation. We hope that other funders will join the effort, too. Shared Insight plans to make grants of approximately $5 million each year for the next three years. In this first year, we put out an open call for proposals in three categories and received nearly 200 proposals that are currently being reviewed. We will announce grant decisions in November.
What do we mean by “increasing openness in service of effectiveness?” We seek to change the culture of sharing and listening among foundations. We want foundations to be more open about what they are doing, how they are doing it, and what they are learning along the way. We are not just asking them to “be transparent,” a request that could mean “share everything,” but rather to be open about aspects of their work that could help others better achieve their own goals. And in order for that to happen, foundations have to listen to what others have to share, too—including the people our funding is ultimately meant to help. We believe that with this type of increased openness, philanthropy will be more effective. Further, we don’t just want one foundation to change, or five, or ten—we want the entire culture of openness to evolve so that these practices are rewarded and new norms and habits take root. We recognize that foundations are both the targets and the agents of change and that if anyone can help catalyze such a shift, it is foundations ourselves.
While it’s still early days, Shared Insight has been highly productive as a collaborative. Together, we co-created a strategy that balanced taking the time to gather everyone’s input with a sense of urgency and a desire to get to work. We’ve moved together from concept to making grants in less than ten months. And even as we’ve prioritized urgency and made decisions relatively quickly, the materials at Fund for Shared Insight, as well as the thought and research that went into them, are rigorous, thoughtful, and responsive to feedback we’ve collected along the way (though of course they are not perfect!).
Excellent planning and project management have been critical to what we’ve accomplished so far. Melinda Tuan does a remarkable job as project manager for Shared Insight. Having this ongoing “backbone” support has been essential—none of the partnering foundation representatives has the bandwidth to manage Shared Insight with the daily attention to detail that it requires.
While planning and strategy have been to central to our success in launching Shared Insight, there is another core element of funder collaboration that may seem at odds with rigor—the serendipity of how it comes together and operates over time when you don’t know for sure what will happen. Someone told me once that serendipity occurs when preparation meets opportunity, and it’s an equation I love (and try to live by) because you can actually “plan” for serendipity. You can be prepared (at every step of a process or collaboration) and you can choose to embrace opportunity at almost every turn. Funders did just that when they agreed to join this group based on only a strawman strategic framework, and have embraced it at every decision point along the way, from co-creating our strategy, to determining the RFP process, to selecting grant recipients. Rather than view unknowns as a negative thing or something we can’t control, the members of this collaborative have embraced the opportunity to hold the space of “not knowing” and make choices together.
The fact that each of the seven Shared Insight funders has made room for serendipity has been a kind of “secret sauce” that has enabled us to overcome many of the hurdles that keep funder collaboration from being more common. I’m grateful to our colleagues for the spirit with which they’ve approached this work, and excited for the serendipity that we’ll encounter on the path ahead.
Since Paul Brest first joined the Hewlett Foundation as President in 2000, the Foundation has made over $65 million in grants to build a stronger philanthropic sector. With these grants, we aim to support more effective philanthropic practice so that all foundations are better equipped to make social and environmental change. We call this our Philanthropy Grantmaking Program, and today it sits within the Foundation’s Effective Philanthropy Group.
Transition points can provide natural windows to reflect on progress to-date, and several such transitions occurred in late 2012 and early 2013: Larry Kramer joined the Foundation as President, Fay Twersky became the first Director of our newly formed Effective Philanthropy Group, and Lindsay Louie joined the Foundation as the Program Officer for the Philanthropy Grantmaking Program. The reflection process we undertook has included third-party evaluations; consultations with grantees, field experts and fellow funders; and thoughtful analysis by both our staff and consultants.
To share our work with the field, we created the 14-minute video included in this post. The video is a shortened version of one that we first produced to share our reflections with the Hewlett Foundation’s Board of Directors last November. The video highlights our strategies, key research and grantees, and the external evaluation findings. It features former Hewlett Foundation President Paul Brest, Stanford Social Innovation Review Managing Editor Regina Ridley, Center for Effective Philanthropy CEO Phil Buchanan, Lead Evaluators Paul Harder and Lucy Bernholz, and others.
As the video shows, we have pursued two strategies to date—one that we will continue, and one that we will not. We believe it is important to share openly about this strategy that didn’t bear out as we expected. In doing so we also want to be clear that our experience and decision are not a reflection on the work of individual grantees we funded. We also want to be clear that we are being open about this work so that our experiences might be helpful to others. We welcome thoughts, reflections and feedback.
For those who’d prefer a written summary of our reflections and links to the two evaluations, they are below.