Just walk away / Damian Gadal

The Edna McConnell Clark Foundation, which had assets of almost one billion dollars at the end of its FY2015, has declared it will spend down all of that within the next ten years. In doing so, it joins a small but growing number of philanthropic bodies that are pre-electing their own institutional end. This makes for a commendable case study of philanthropic humility about to unfold.

As readers know, Atlantic Philanthropies is in its final year and the Gates Foundation is the poster child for the intention to sunset. But most of us, if I am not mistaken, thought of EMCF as an in-perpetuity endeavor even as its grantmaking became more markedly outside the norm: No meager portions for its most central grantees; instead, they provided and administered mega-grants that included rare nonprofit-directed working capital and money for real outcome evaluations and capacity building. They essentially led if not created data-driven grantmaking. They learned as they went what worked and what did not; they adjusted, and they stayed in for multiple years, they recruited other big investors.

Still, what comes as a surprise to many was apparently long under consideration at this 47-year-old family foundation. A letter cosigned by EMCF’s board chair, Larry Clark, and its president, Nancy Roob, declared:

When the Clark family established EMCF in 1969, they did not envision it as a perpetual foundation. They made clear that they wanted the Foundation to make decisions based on what would produce the best results. In the words of Hays Clark, one of EMCF’s founders, “If we found a good opportunity, we would bet the farm on it.” Thanks to a lot of learning over the past two decades, we are now ready and committed to do just that.

This is not the first significant change made over the past generation. Before the late ’90s, EMCF was invested in an array of fields that included criminal justice and the developing world. But by 1999, it was beginning to zero in on youth.

Most observers know that EMCF has invested deeply in youth development in a way meant to discover, strengthen, scale, and improve the outcomes of the best performing organizations in the field. Its highly rigorous approach has attracted other foundations and high-net-worth individuals and convinced them to co-invest their own very significant capital in the identified organizations through Blue Meridian Partners. In fact, Blue Meridian has to date committed to investing up to $200 million in individual organizations the 12 partners have agreed to back, and the group intends to continue operations after the EMCF closes. Roob and Clark explain:

Since 2000, we’ve experimented with various ways of addressing the undercapitalization of high-performing nonprofits that are improving the lives of disadvantaged youth. In 2007, we began leveraging the Foundation’s resources through capital aggregation—that is, pooling our dollars with those of other donors seeking efficient and effective giving vehicles. Through these efforts, we’ve now deployed nearly half a billion dollars in support of exceptional nonprofit leaders, their organizations, and, most importantly, the young people they serve.

Although we’ve had some missteps along the way, our capital aggregation projects convinced us we were onto something important and valuable. So at our board meetings we started asking think-bigger questions like these:

  • What would it take for us to invest at a level in keeping with the massive scale of the challenges millions of young people face?
  • What would it look like to scale up the investment approach we have built and tested since 2000?
  • As new donors seek to make an impact on the same issues we’re passionate about, how can we share with individuals and families the benefits of our investment approach and talented staff—so they don’t have to duplicate efforts?

All roads led to our decision to go bigger and go deeper in concert with others.

In doing so, the foundation appears to be making a clear-headed decision to exchange their institutional life for the greater stability of their select group of grantee organizations. Roob and Clark write:

We realize the decision to sunset a thriving institution is unusual. As a board, we began discussing this option many years ago as we watched our grantees and other nonprofits struggle during and after the Great Recession. Following much exploration, we all agreed that expanding and accelerating our investment approach, in partnership with others, provided our best shot at fulfilling EMCF’s mission now. Being able to build on the momentum capital aggregation has gained and contributing to meaningful innovation in philanthropy are the prime reasons for our decision. Given the urgent needs of youth in our country, the opportunity to dramatically step up our game and our giving is the right decision for us.

It is a logical end for an organization that set its sights on and devoted its energy to building world-class, world-changing grantee organizations. In spending down, it will use many of its current mechanisms and will retain its tight focus on well-measured impact in youth development and organization building toward that end.

First, we will invest more deeply in Blue Meridian Partners, the new collaborative funding vehicle we announced earlier this year. Blue Meridian is designed to meet the capital needs of the highest-performing organizations poised to make a national impact on pressing social problems. The decision we are announcing today gives us confidence that Blue Meridian will surpass its initial goal of raising $1 billion.

We and our growing group of philanthropic partners are excited about the long-term prospects for Blue Meridian Partners, based not only on what its unprecedentedly large investments will do to raise the goals of outstanding nonprofits and their leaders, but also on the value Blue Meridian can add for new donors eager to leverage EMCF’s knowledge and infrastructure.

Second, we will continue to invest in our core Youth Development Fund, which provides capital to fuel the growth, improve the quality, and enhance the sustainability of high-performing organizations with strong evidence and great track records. We do not anticipate taking on new Youth Development Fund grantees. We will focus instead on accelerating and sustaining the work of existing grantees.

Third, we will continue to expand the work of EMCF’s PropelNext, which partners with other investors to help promising nonprofits build their capacity to collect and use data for learning and improvement. We will support the growth of PropelNext in the short term with new investments in staff and additional efforts to strengthen its curriculum. We will also explore additional partnerships that may enable PropelNext to live on well beyond EMCF.

The foundation also says it will ramp up its sharing of the big bank of knowledge it has built up in the course of its unusual practice. This should include information about how to successfully capitalize organizational growth, how to aggregate capital from a foundation base, how to effectively help grantees create a base of evidence, understanding the pattern of successes and failure in rapid organizational growth, and much more. One of EMCF’s five core values is humility, and that may stand in the way of an intensive program of philanthropic peacocking. Nevertheless, the rigorous, serious, and fundamentally bold quality of its practice deserves the careful attention of philanthropists in every field of endeavor.