These Two $1 Million Grants Are a Waste of Money

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Money-throw-away

 

Editor’s Note: Pablo Eisenberg is one of philanthropy’s most outspoken observers, and here he takes up the recent awarding of two grants, each for a million dollars, to organizations that are a part of the philanthropic infrastructure. There are a number of issues at play here, and as with any op-ed, we do not necessarily agree with Pablo’s stance. However, he remains one of the insightful champions who have kept open dialogue alive in philanthropy. As always, we invite readers to respond.


At a time when small grassroots, advocacy, and watchdog nonprofits are desperately fighting to maintain their precarious budgets, two recent million-dollar grants to two established, well-financed organizations seem inappropriate and a waste of philanthropic resources.

It is hard to tell why the Ford, Hewlett, Packard, Kresge and Robert Wood Johnson foundations and the Rockefeller Brothers Fund would combine to provide general support funding to the Center for Effective Philanthropy, based in Boston, and Grantmakers for Effective Organizations, an affinity group of the Council on Foundations, both of which already receive ample financing from the foundation world.

The Chronicle of Philanthropy labeled the grants as akin to MacArthur genius awards for nonprofits. The funders said it was an effort to step up the two organizations’ work to improve the performance of foundations. But however the grants are called, they do not appear to carry the seeds of creativity and innovation. Genius organizations, they are not.

The Center of Effective Philanthropy has an annual budget of $7 million and a staff of 36. It does research on foundation practices and is perhaps best known for its “satisfaction” surveys of foundations, which try to determine the reaction of both foundation and grantee staff to a foundation’s grantmaking process. This is the softest type of evaluation; the Center does not sponsor independent, hard-hitting evaluations. Nor does it explore some of the more fundamental ailments of the field: the lack of diversity on foundation boards, the enormous growth in unsolicited proposals, the inequity of who gets the benefits from foundation funding, the stagnant payout rate; the dangers in the increasing number of mega-foundations, and the issue of philanthropic control and power. In short, it is by no means a foundation change agent.

Grantmakers for Effective Organizations is an in-house institution that tries gently to push the foundation community toward better standards, greater accountability, higher performance and more effective leadership. It has an annual budget of $4.5 million and a staff of 25. But it, too, does not have much of an advocacy bone, preferring not to engage in the tougher issues that face the foundation world.

What is notable about the two recipient organizations is that their boards are almost entirely composed, with few exceptions, of foundation or ex-foundation people. James Abernathy, former ED of the Environmental Support Center, appears to have been the lone nonprofit representative in the history of Grantmakers for Effective Organizations. No major nonprofit leaders or community activists have had the opportunity to contribute to the thinking and decision-making of either organization.

During the past year, the Center for Effective Philanthropy received $1,400,000 in general support from the six funders that just gave the organization an additional million dollars. And its funders’ list comprises a “who’s who” of major foundations. Did it really need the new money?

Similarly, Grantmakers for Effective Organizations has an impressive stable of funders, large and small. The past year, it received $200,000 from the Ford Foundation and $425,000 over three years from the Hewlett Foundation in addition to its $1 million grant. It is not in need of additional resources. As an insider within the foundation community, it can command whatever support it requires. So why give it more?

The two grants send an unfortunate, indeed undesirable, message to the nonprofit community. Not that the two recipients are doing a lousy job; in fact, both organizations are well led and doing competent, if pedestrian, work. But their undeserved grants say loud and clear that foundations seem to care more for their own colleagues than for those nonprofits that are laboring hard under financial duress to address our society’s major social, economic, environmental, and cultural problems.

There are plenty of fine nonprofits in in a variety of fields that could use a couple million dollars. Our major foundations should think about them before they make other, similarly well intended but unsuitable awards. Perhaps we should consider ourselves fortunate that the six funders did not give additional million-dollar grants to the Council on Foundations and Independent Sector.

  • Patrick Lester

    Pablo Eisenberg is, as always, provocative — saying things others may be too nervous to say. But in this case he is creating a false choice.

    Pablo criticizes GEO and CEP for not taking on some important issues, but most of them happen to be issues addressed by the National Committee for Responsive Philanthropy.

    There is an important role to be played not just by outsiders, but also by insiders. By most accounts, the reports that CEP gives to foundations are eye-openers, providing blunt and anonymous feedback from their grantees that the grantees are unable to provide themselves. CEP also provides important benchmarks, so foundations can see how they stack up. Similarly, GEO is doing a lot to promote important issues like grantee capacity building.

    Making GEO and CEP more like NCRP would just make them redundant. There is an important and valuable role to be played by both outsiders and insiders.

    • Phil Buchanan

      Thanks for this thoughtful comment, Patrick. Pablo also totally misstates what we at CEP actually do, as I pointed out in our reply. It is as if he didn’t even look at our website, much less try to understand our work or the way it has in fact affected the power dynamic in philanthropy for the better. Phil

  • Aaron Sanderson

    This does not make any substantive reference as to what the funding was for. Perhaps these new funds are to increase efficacy, empower change, build capacity to dive deeper in evaluation and analysis. Listing their budget and FTE is a very superficial way to make a case for ineptitude. Moreover, this conveniently ignores how a $1M investment (at an organization with a $4.5M annual budget!) could have a transformative impact. Near sighted.

  • Thank you, Pablo Eisenberg, for your characteristically direct, thoughtful, and insightful opinion piece.
    All too often the foundation world is an echo chamber, as foundation executives congratulate, reinforce, and, in this case, fund one another. These are not bad people. In fact, most are smart, earnest, and well-intentioned. But there is precious little ventilation in these chambers. The dearth of input from the actual nonprofit community — that is, those organizations that actually provide mission-driven services — is, as this piece points out, a major (and chronic) issue. The sad fact is that, even if let into those circles, nonprofit leaders would be loathe to express their true opinions. There is a severe power imbalance, and nonprofit leaders, for obvious reasons, are reluctant to utter a word of public criticism about foundations.
    I saw a couple of social media posts saying that Pablo Eisenberg is brave to raise these issues. There’s no one I respect in the field more than Eisenberg. He is consistently forthright and smart about philanthropy. But is it not a comment on the power imbalance that to point out the obvious — that major foundations should give their money to worthy causes, rather than to already well-funded foundation-centric organizations such as these — would qualify as bravery?

  • David Callahan, Editor

    I can see why the funders behind these gifts believe they need to boost whatever infrastructure exists to assess the effectiveness of foundations. Among other things, it suggests they do hear complaints about accountability that people like Pablo Eisenberg have been raising for years. But it’s also true, as Pablo says, that CEP and GEO, two of the main groups that operate in this space, have such close ties to foundations that it complicates their ability to be as independent as watchdogs should be ideally be. I don’t say that to question the integrity or work of those groups, which I’ve often found really useful; but rather to point out a structural conflict of interest here. Even NCRP, which might logically have shared in these gifts, is largely reliant on foundation funding.

    So the big question, which this piece leaves unanswered, is this: what would it take to create truly independent oversight of the foundation world? Anything the foundations fund is always going to have limitations, but who else could pony up the kind of serious money needed to capitalize hard-hitting outside assessment of thousands of foundations?

    Three answers come to mind.

    First, you could imagine nonprofits teaming up to fund an effort along these lines through an organization funded by membership dues. I’m guessing that a watchdog outfit capitalized by thousands of grantees would take a different tack than one dependent on a much smaller pool of donors who are grantmakers.

    Second, you could imagine government funding such an effort, drawing on excise taxes or other fees, as some have suggested (including Pablo, I believe). People may not like the idea of getting the state involved, but you could imagine the funds being directed to an independent new organization with careful firewalls in place to prevent political meddling. There’s lots of precedent for that. And let’s not forget that taxpayers do have a dog in this fight, given how they subsidize philanthropy.

    Finally, you could imagine for-profit media playing a much bigger role in assessing the effectiveness of foundations. The question is whether the business model is there to really make this viable and generate the capacity to do the job properly. On that point, stayed tuned.

    – David Callahan, founder and editor of Inside Philanthropy

  • Phil Buchanan

    Mr. Eisenberg’s piece is inaccurate in its description of CEP. I appreciate NPQ running my response, and also a response from GEO, here. https://nonprofitquarterly.org/2015/11/16/cep-and-geo-respond-to-eisenbergs-two-1-million-grants-feature/ Phil Buchanan, President, The Center for Effective Philanthropy