16 September 2019

Why are we doing this? How foundations are thinking differently about their missions

Historically foundation activity has largely meant grant giving, and as grant givers much of our attention has focussed on “how” questions: How do we communicate our requirements? How do we treat applicants fairly? How do we measure effectiveness? Reflecting on how things have changed over the past 30 years my observation is that foundations are increasingly asking themselves more fundamental “why” questions, starting with the most fundamental of all: “Why are we doing this and what are we trying to achieve?”

Foundations and governments: Where does the buck start and stop?

The first driver is contextual. Everything that foundations do takes place in the context of the actions of governments. The fundamental question for foundations is always how best to use their independence and their potential for action in the context of what governments are doing. For most of the past 30 years we in Europe have had social democratic governments whose objectives were largely in tune with those of foundations. Government funding is of course vastly greater than that available to foundations, but for all its size government funding is limited: Decisions reflect political priorities and as independent actors we are free to disagree with those priorities, or to think that wrong decisions have been taken. Most foundations have taken the view that they should not use their funds simply to replicate or supplement government funding, but that has left ample space for them to support what governments say they cannot fund (because resources are stretched and they do not afford it sufficient priority); or will not fund (because they are opposed to the action); or occasionally should not fund (because government intervention would be counterproductive).

In 2019 the picture looks different. In the UK government support for social and community services has been cut dramatically. Initially presented as a necessary response to the financial crisis of 2008, it has become clear that smaller government and less government spending has become a key driver. An election may change that, but across the world the rise of neoliberal small-state governments suggest that it is a trend that is here to stay. Foundations are increasingly having to ask themselves how they will respond. Will they accept a role they have historically resisted – that of filling as best they can the gaps that are left by the withdrawal of government funds? Or will they use their resources to try to change or even oppose government policies? And if so are they (and the societies in which they are embedded) comfortable with the inevitably more political role that that entails?

An increasing array of funding models

A second driver has been the increasing visibility of different funding models, many developed outside traditional domains of philanthropy.

Developments in social investment in particular have opened up new ways of thinking. It is a challenge to mainstream philanthropy that many significant new players have simply ignored traditional grant giving methods and have developed programmes based on techniques drawn from the world of business – loans, equity positions, social impact bonds, joint ventures and the like. These new models have found favour with governments and have become influential in policy thinking. Foundations are famously prone to being insulated from outside influence, but it is hard to ignore the significance of these new ways of working. And reflecting on the wide range of outcomes that become possible leads inevitably to questions about what we are trying to achieve.

Debates about how foundations manage their endowments have also led to new thinking. Discussions of the ethics of investing have led to a weakening of the traditional walls between investment policies and funding programmes, as have arguments (mainly from the US) that foundations should be using all their financial assets, not just their income, to pursue their missions.

Many foundations have concluded that these developments are not for them. They fear, for example, that the complexity of offering loans or entering partnerships makes it too difficult for them to contemplate, or that using their investments directly to support their mission is too risky. But whatever the outcome, I would argue that the process of thinking through these decisions has led many foundations to a more sophisticated understanding of the mechanisms that lead to the changes they are trying to effect. That in turn has led to more expansive thinking about the role that foundations can play, and how they can make better use of their assets to achieve their ends. Foundations may conclude that grantmaking is indeed the best answer for them, but they are increasingly exploring other options to go alongside traditional funding mechanisms: loans and other financial instruments, making use of networks and contacts, convening, lobbying, running their own programmes, collaborating with others (including government and business), and many others.

One indicator of this change has been an increasing interest in “theories of change”, a useful term which describes how, if we are trying to achieve a change, we need to think through the process by which it might happen and what our role is in that process. Change will rarely happen simply as a result of a foundation’s actions, so we need to understand who else is involved and what their roles are; who needs to be persuaded; what levers are available; how we can best work alongside other actors; and where we can use our resources most effectively. This has led to a more sophisticated understanding of the added value that a foundation can bring; not just through funding, but by bringing expertise, access to networks and convening power.

Learning with and from each other

What role can the EFC play? It helps to begin by acknowledging that thinking about intentions is difficult. Ambitions must be tempered by a realistic appraisal of what resources are available, but the big message of the developments I have been discussing is that foundations often underestimate the value of their non-financial assets (their knowledge, expertise, networks, convening power etc.) and what is achievable when they bring all their assets to bear. In asking these fundamental questions two things are invaluable, but hard to find. The first is models that foundations can relate to, i.e. examples of work by organisations that are similar in size and interests. The second is opportunities for exchanges and discussions with like-minded organisations. The EFC is well placed to provide both.


Anthony Tomei

Trustee, The Bell Foundation