Foundation Boards Should Demand Failure, Expert Claims

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Joel Orosz, founder of the The Grantmaking School,* the first university-based training program for grantmaking professionals, has come out with an extraordinary new book titled, Effective Foundation Management: 14 Challenges of Philanthropic Leadership—And How to Outfox Them. What makes it extraordinary is the willingness of Dr. Orosz to speak with candor about the challenges, both ethical and practical, of working in a profession that “lacks a salutary external discipline.”  Even those who don’t work in philanthropy will benefit from his honest portrayals of foundation CEOs and program officers struggling against flattery and other forces to do good and meaningful work.

I found what Dr. Orosz wrote on the subject of foundation risk-taking especially revealing.  If foundations have the freedom to try pretty much anything to address society’s problems, he asserts, “if they are indeed boldly exercising [their freedom] to correct the failures of the market, the government, and the fundraisers, it would be virtually impossible to open a newspaper without reading of a groundbreaking social experiment fueled by their funding.”  Unfortunately, the newspapers are more likely to be filled with stories of foundation scandals than of foundations successes.

It’s true that a good scandal sells newspapers, and foundations as a class are not very good at communicating their good work.  But according to Dr. Orosz, there’s a hidden, perhaps more important, reason for the inability of many foundations to move the needle on some of our most pressing social problems.  That reason is embarrassment.  According to Orosz:

Since foundations are undisciplined by the market, electorate, or funders, their only impetus for improvement comes from their (generally) self-perpetuating board of trustees. If you are a foundation leader, your imperative thus is a simple one: keep the board happy, and you will keep your job. So, what makes a board happy? The answer is easy: pride-inducing success. What makes a board unhappy? The answer is equally easy: embarrassing failure. What does this mean for the CEO? As a practical matter, the answer to this question is also very simple: since any kind of success is preferable to any kind of failure, since embarrassing the board members is to be avoided at all costs, it is critically important that every project be a success. What is the best way to ensure that every project will be a success? The key to perpetual success is to keep every project uncomplicated and modest in its ambition. Thus, inexorably, in order to keep their boards happy, in order to assure that embarrassment never darkens the trustees’ doorsteps, CEOs tend to seek the cautious and incremental success. Paradoxically, the societal organization given the most freedom to act hobbles itself; it is as if a superb French chef, capable of creating any gastronomic delight, insisted on making nothing except the blandest of oatmeal.

It was Longfellow who said that “Most people would succeed in small things if they were not troubled with great ambitions.” Dr. Orosz appears to claim that our ambitions in philanthropy are almost criminally modest.  If the responsibility for this faintness of heart ultimately rests with a foundation’s leadership, i.e., its board of directors, how should it modify its practices?  Should boards, for example, demand failure?  Yes, answers Dr. Orosz:

Not sloppy failure, of course, for no one wants that. Boards, however, must demand a certain level of experimental failure, for that is the price of doing business in the nonprofit sector, the cost of true innovation, the payment for clearing the kudzu of modest, incremental, “so what?” success. By demanding occasional experimental failure, boards free foundation leaders from their self-imposed play-it-safe shackles. If not every meal has to be perfect, the French chefs can abandon oatmeal and experiment with exotic new dishes.

Compare Dr. Orosz’s call for “experimental failure” with the tried and true of supporting direct services.  Where should foundations place their bets?

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* Pause for disclosure: I will become a member of The Grantmaking School faculty starting this fall.  Apart from a small honorarium, I will receive no compensation for my services.  Nobody at The Grantmaking School has in any way censored what I write on this blog, nor have they suggested topics for my consideration.

Image source: magnamags.com

Comments

[Holden]

This is a false distinction. There is nothing easy about direct services - and I've yet to see any foundation, ever, demonstrate success with them. Changing people's lives for the better *and publicly showing that and how you've done so* seems ambitious enough, in that I've never heard of its happening before.

The definition of "success" seems to be what's at issue. Every foundation paper I've ever read about successes and failures has been entirely procedurally focused - was the program carried out as planned, are the people who were involved in it happy, was engagement high, blah blah blah. Did they change people's lives? Publicly establishing that is truly ambitious.

Meanwhile, what really bothers me about things like advocacy and "raising awareness" isn't that they're so likely to fail - it's that they're so immune to the kind of failure I want to see. Because the goal is 1000 years away, no one ever has to answer for what's been done to date.

[Albert Ruesga]

You're right, there's nothing easy about the work of direct service organizations. The kinds of successes they typically claim--a child inoculated, a homeless family housed--might not be the kinds of transformations you're looking for from the organizations you fund, Holden. (Or are they? I can't quite tell from your guidelines.) I think it might be too harsh to say these organizations don't change people's lives for the better, insofar as a full stomach is a welcome change from an empty one.

You'll need to explain a little more clearly what you mean by the kinds of failures you'd like to see in advocacy work. Sounds like an interesting concept. In the meantime, here are some pretty clear advocacy success stories.

[Julio Marcial]

I've been in philanthropy for more than nine years (yes, I know, a short time compared to 'lifers' in the field), and I've talked to many program directors, CEOs, board trustees, etc. It's quite obvious to me that nobody wants to fund failure.

But I do think foundations have to be open to the notion that, if they are going to operate as "change agents," there will be instances of failure.

Foundations need to accept that not every grant is going to be successful. I've seen multi-year, multi-million dollar grants fail, yet I've seen $10,000 grants flourish. We, grantmakers, need to think of ourselves as risk-takers, and to learn from our failures.

If we are not failing some of the time, we are not living up to our mandate; it means we're not pushing ourselves enough, taking enough risks. So let's embrace failure as it happens because it will happen.

To that end, we need to communicate better to help folks understand that we're going to make some grants that fail, and that we're going to fund them anyway because we think they're worth it.

[Albert]

Thanks for these comments. I'd be less inclined to agree with Joel about the need for more calculated risk-taking if we didn't have institutions like the Grantmaking School and new resources like the Foundation Center's PubHub. These resources help us remember the mistakes we made and, in some cases, why we made them. It's true that the foundation field is only about a hundred years old--compare that with medicine, for example--but we still tend to forget far too much and thereby end up repeating old mistakes.

[erasmus]

Like a mirror held up to nature, unfortunately.

[Allyson Reaves, SC]

I'm curious to read more about Dr. Orosz's thoughts on variations of risk. The growth of a community foundation, for example (and note how I respectfully disagree with him here) is certainly regulated by the market in which it exists; by extending its risk in its investment, programming, and organizational decisions, it can deter long term and potential donors from investing and cause endowment building to come to a screeching halt. i fully support the idea of foundations taking a higher degree of risk; however its classification as a family, private, corporate, public, or community foundation will influence the degree of risk to potentially be taken

[Albert Ruesga]

Point well taken, Allyson. Having once worked at a community foundation, I can confirm the bracing effect of the need to fundraise from multiple donors. I wonder whether Joel would let community foundations entirely off the hook. Even here I think it's possible to ask: For whom are we raising endowment and to what end? Is it possible to bring at least part of the donor community along? Can we take larger risks and still meet the IRS's public support test?

[Holden]

Sorry for the late reply.

RE direct service: there are certain kinds of direct service that are very straightforward in nature - hospice care is a good example to me, because all you're trying to do is make the person more comfortable and happy, and it's easy to tell if you're accomplishing that (just ask them). But the kinds I'm most interested in are the ones aiming for more lasting and less easily observed changed. I'll give meals to the hungry, if it's the most promising way of helping them escape poverty for good. Knowing that is far from straightforward. A foundation that could help people escape poverty cost-effectively, and document it, would be accomplishing something quite ambitious and worthwhile.

RE advocacy: I should admit that I have this annoying tendency to associate "govt" with "federal govt." Advocacy of the kind you point to is somewhere between this and direct service; it's much less ambitious, and much more susceptible to short-term results (for the latter reason, I'm generally more comfortable with it). I'm thinking of large-scale federal-level advocacy when I complain about the impossibility of declaring failure. I don't have a good way to say when an initiative like this has failed, which is exactly why I'm hesitant to support it, and why I think you have to think really carefully before pouring your resources into it.

As for the link you pointed me to, as I said, it is more promising. It is still very much an annual report, discussing only successes and short on details. For example, it's impossible to tell whether the funding actually accomplished anything, without a complete breakdown of how much was spent where (including on projects that "resulted" in nothing). Otherwise, the report could easily just be listing all the places where laws changed, and claiming "credit" for them. More context would be needed to convince me that results were attained. But, the report is a good start, and definitely shows that I've been thinking of "advocacy" too narrowly (ignoring smaller-scale projects).

[Pablo]

Thanks for the post. Agree with much of it. Though perhaps it might often depend on the sector/area a Foundation is operating. In some situations even minimal failure or a setback would be disastrous to the population/cause that is trying to be helped.

Additionally, increased churn in the sector might be good. We want the top-performing and most innovative organizations to receive the funding and backing they deserve. Just a little bit more of Darwin’s ‘survival of the fittest’ or Schumpeter ‘creative destruction’ wouldn’t be a bad thing.

[Albert Ruesga]

Agreed. Greater risk should always be in some sense "calculated." Nobody's suggesting we be reckless.

[Phil]

The deep point in the Oroz insight is sociological. Who is on the Board and by what are they embarassed among "their own kind"? Why not design a survey in which Board members are given scenarios and asked to rate how embarassing they would be? "You fund a dissident blogger collective which is attacked as un-American by Bill O'Reilly?" Rate it.

Don't we have in Oroz a very clear account of how wealth and the culture of wealth "dominates" philanthropy and keeps our cultural formations from becoming embarassing to those in charge?

Being inoffensive, then, is the key to success? Inoffensive to the leaders of the very cultural formations that are "the root cause"?

Failure is not embarassing. Success would be. Failure just means maintaining the status quo. Success means putting the Board's world at risk.