Foundation Management and Performance

Foundations and other nonprofit organizations play a major social, cultural, and economic role in American life, and in recent years have assumed increasing responsibility for maintaining society's safety net in an era of constrained government budgets. This collection of essays from the Fund's executive vice president and chief operating officer addresses issues in foundation management, effective grantmaking practices, and public accountability.

The Archives of U.S. Foundations: An Endangered Species
December 20, 2012
Using data collected on the 300 largest U.S. foundations through a survey commissioned by The Commonwealth Fund, this essay reports on the current status of archiving in the foundation sector and recommends ways to improve policies and practices in an area that is too often overlooked.

Bringing the International Experience to Bear on the U.S. Health Reform Debate: The Commonwealth Fund’s Harkness Fellowships Program
March 5, 2012
This essay reports on a review of the Fund’s international Harkness Fellowships in Health Care Policy and Practice program, which was undertaken in 2011 at the request of the foundation’s board of directors. The findings, which draw on the foundation’s long experience in conducting fellowship programs, are likely to be of interest to other organizations that support, or are considering supporting, such programs, as well as to stakeholders in fellowship programs.

Modernizing the 990-PF to Advance the Accountability and Performance of Foundations: A Modest Proposal 
March 7, 2011
In this essay, Commonwealth Fund executive vice president and COO John E. Craig analyzes the shortcomings of the tax return form for private foundations, and discusses how the 990-PF could be transformed into a more effective instrument for promoting accountability and best practices in the foundation sector.

Rethinking the Management of Foundation Endowments
March 15, 2010
As the implications of the 2008–09 financial crisis for the world economy and markets have become clearer, many foundation executives and investment committees are reassessing their approach to endowment management. This essay reports on the effects of the recent turmoil on foundation endowments thus far, and offers lessons from the crisis and earlier ones that could help boards and investment committees responsible for foundation endowments avoid mistakes going forward. The essay concludes with an analysis of alternative models available to foundations for managing their endowments, highlighting the strengths and weaknesses of each and providing recommendations on preferred models.

New Financial Realities: The Response of Private Foundations  
March 12, 2009
In recent months, the international financial system has experienced the most severe turmoil since the Great Depression of the 1930s—stresses that in September 2008 came close to completely freezing up the flow of credit that is the lifeline of all economic activity. The ensuing bankruptcies and fire sales of financial powerhouses and the government's interventions, have fundamentally changed the structure of Wall Street and international financial markets. Although the real-world impact of financial chaos is just beginning to unfold, it is useful at this point to contemplate the implications for private foundations and the constituencies they serve.

High Performing Foundations: The Role of Risk Management
January 2008
With the collapse of Enron in 2002, the subsequent unexpected corporate failures and accounting scandals, and most recently, the breakdown of the subprime mortgage market, risk management has become a major focus of boardroom attention. While few of the Sarbanes–Oxley measures apply directly to nonprofit organizations, risk management is as important in the nonprofit world as it is the corporate sector.

The Commonwealth Fund Performance Scorecard
March 2007
In the nonprofit sector, assessing organizational performance is challenging. Financial success is but one measure of institutional success, and achievement toward nonfinancial, mission-related goals is both more important and more difficult to quantify. In some segments of the nonprofit sector—higher education, for example—methodologies for assessing performance have been developed and are accorded considerable attention, even if the metrics and the uses to which they are put are not universally applauded. This essay discusses the "balanced scorecard" adopted by the Fund to measure organizational effectiveness, clarify goals and strategies, and ensure continued high performance.

Foundation Performance Measurement: A Tool for Institutionalized Learning and Improvement
January 2006
The Independent Sector's Panel on the Nonprofit Sector clarified the terms of that responsibility in its June 2005 report to Congress and the nonprofit sector, Strengthening Transparency, Governance, and Accountability of Charitable Organizations. The Fund's own experience confirms that standardized metrics and reporting systems are unlikely to align well with the work of most foundations or be sensitive enough to provide useful lessons. Instead, foundations should assemble an array of methods that allow them to examine their own performance and that of their grantees, make improvements based on lessons learned, and report findings to their various audiences. This holds true especially for the Fund and similar "value-added" foundations, which work directly with grantees to develop projects, carry them to fruition, and disseminate results.

Regulating Foundations: A Delicate Balance
January 2005
Foundations have been the subject of much scrutiny over the last year on Capitol Hill, in the offices of state attorneys general, and in the media. Amidst numerous calls for increased regulation of the sector, leaders of the foundation community have attempted to respond to the challenges posed. Yet, so far, relatively little of the attention has focused on the positive role most foundations play in society—and how to avoid damage to strongly performing institutions while ensuring accountability throughout the sector. Many people, both inside and outside philanthropy, believe that a closer, more comprehensive, and much more thoughtful examination of the regulatory structure governing foundations is warranted.

An Undervalued Species: Private Value-Added Foundations
February 2004
Permanently endowed private foundations that conduct research and work directly with grantees to develop projects, carry them out effectively, and communicate results to policymakers and institutional leaders have a long record of accomplishment in this country. "Value-added" foundations perform an important function by underwriting policy research, service delivery experimentation, and infrastructure development within their fields. The future of such foundations is threatened by proposals to disallow their intramural expenditures as contributing to the minimal annual payout mandated by Congress.

The Value-Added Foundation: Grantees' Views on the Fund's Performance
February 2003
Foundations can be seen as adding value in selecting the best grantees; signaling the worth of particular projects and grantees to other funders; improving and enhancing the work of grantees; and advancing the state of knowledge and practice in the foundation's fields. Achieving the objective of adding value requires well-defined strategies: a foundation must choose fields in which it is particularly well equipped to add value; focus on those fields and avoid dilution of effort to peripheral areas; and learn to identify emerging issues and seize windows of opportunity.

Assessing the Value of Small Grants Funds
February 2002
By enabling the foundation to move quickly and flexibly to underwrite very targeted work, a small grants fund helps to inform major program areas, finance key policy research, communicate program findings, promote discourse on health policy issues, and revisit issues addressed by earlier undertakings. Allocating 5 to 10 percent of a foundation's grants budget to such a fund can provide the flexibility needed to advance program strategies.

The Fund's Performance as a Grantmaker, 1992–1999
February 2001
The Fund developed a comprehensive performance review system and then tested it by rating all sizeable grants approved and completed between November 1992 and December 1999, a total of 204 projects representing grants of approximately $56 million. The ratings and associated comments, along with summary lessons from completed grant reports and program reviews, helped to assess performance and steer the Fund's course over the next five years. Foundations can use performance assessments of this type beneficially to promote accountability, improve grantmaking strategies, and better inform audiences of the impact of their work.

Assessing Foundation Communication Activities: Obtaining Feedback from Audiences
February 2000
Foundations seeking to improve public policies and encourage best practices in the delivery of such services as health care need to be equipped to communicate effectively to influential audiences the results of the work they sponsor. The Fund conducts periodic surveys of its audiences to ensure continuing improvement in its communications activities.

Executive Vice President's Report: Assessing a Foundation's Performance
February 1999
High performing foundations share four general characteristics: a clear mission; an ability to focus; a program of well-defined, specific strategies; and a solid intellectual grounding in their fields of interest. Paying attention to vital signs for foundation governance, leadership and staffing, operations, program evaluation, and endowment management can help identify weaknesses and improve a foundation's performance.

Communicating Foundations
February 1998
A survey and case studies of eight institutions reveal that a very small number of influential foundations are in the vanguard of foundation communications. The examples they are setting not only advance their own mission, but are likely to stimulate other foundations to reexamine their traditional practices and look for new opportunities made possible by the communications revolution.