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A Range of Operating Styles
The earliest foundations, including The Commonwealth Fund, have pursued a "value-added" style of grantmaking. From the beginning, they employed professional staffs charged with the responsibility for developing grantmaking strategies, working with grantees to develop projects, monitoring the progress of grantees' work, taking corrective action when needed, and disseminating the results of the work of grantees. Value-added foundations have also mounted their own intramural research programs and taken responsibility for managing programs or projects directly when skilled external grantees were not available, or when direct management by the foundation was expected to be a more productive strategy. Run essentially as nonprofit businesses, value-added foundations have enhanced the impact of their programs by connecting grantees with each other to build synergies among projects. In addition, they have created opportunities for grantees to present their work to influential audiences, and developed communications programs whose activities include co-authoring papers with grantees, operating sophisticated Web sites, and testifying before Congress. Not surprisingly, foundations with a value-added operating style have also emphasized the assessment of performance relative to goals, not only for grantees but for their own work.
The value-added approach of the early foundations, with its many requirements and pressures, proved more challenging than most donors were willing or could afford to attempt. As a result, for many years the great majority of foundations operated purely as grantmakers, focusing on basic due diligence with regard to proposals and the work of grantees. In contrast with value-added foundations, these "low-engagement" foundations do not need substantial intramural staff and therefore have low internal operating budgets.
Over the last 25 years, however, a growing number of foundations—particularly large, newer ones—have chosen to adopt the value-added model. In fields such as health care, they have been stimulated to do so by the example of established institutions like The Commonwealth Fund, which provide evidence that devoting substantial resources to intramural activities over an extended period pays off handsomely in terms of the productivity of grantees and the foundation's overall performance. (3) Other circumstances contributing to the return to favor of the high-engagement, value-added model are the proclivities of entrepreneurial founders, who tend to apply to their philanthropic efforts the same energy and hands-on direction that made them successful in creating major new businesses. Additionally, a growing body of literature by researchers such as Michael E. Porter at Harvard Business School supports the pursuit of value-added strategies. (4)Thus, the operating styles of private foundations today range along a spectrum from low engagement to high engagement. An understanding of a foundation's operating style is essential for understanding its spending practices. (5) Regrettably, few observers outside the field seem to appreciate this, with the result that some observers label all intramural spending as questionable, while the press often describes intramural outlays by foundations as "expenditures on themselves." |
