Report Assesses Impact of Philanthropic “Big Bet” on Employee Ownership

At NPQ, we have, from time to time, examined the impact of philanthropic big bets. The Gates Foundation, the nation’s largest private foundation, is well known for its proclivity to “swing for the fences,” with mixed results (more success in global health, less success in US education). The MacArthur Foundation, too, has engaged in “big bet philanthropy” with its $100 million (“100&Change”) grant competitions, with similarly mixed assessments to date. 

At $24 million, [Kendeda’s grant program] was the single largest philanthropic investment ever made to support employee ownership. 

The principle behind such efforts is for philanthropy to eschew risk aversion and instead purposefully take risks to advance practice in a field. As John Palfrey, president of MacArthur, puts it, “If philanthropy doesn’t act as society’s risk capital, we’re making a terrible mistake.” In short: nothing ventured, nothing gained.  

In this context, the decision announced in 2019 by the Kendeda Fund, an Atlanta-based private foundation, to commit $24 million as it was spending down its assets, might be considered a “little big bet.” Nonetheless, at $24 million, it was the single largest philanthropic investment ever made to support employee ownership. 

Now, a report from the Ohio Employee Ownership Center (OEOC) at Kent State University (which was not one of the four grantees) offers a preliminary assessment. Authored by OEOC Director Chris Cooper and Program Coordinator Michael Palmieri, the report, Employee Ownership at the Crossroads: Reflections on the Kendeda Fund’s Big Bet on Employee Ownership, examines how Kendeda’s bet has turned out so far—and highlights some lessons learned from the four organizational beneficiaries.

The Theory of the Case

As the term suggests, the idea behind big bet philanthropy is to pour large amounts of resources into a small number of groups, with the goal of shifting practice throughout society. This is the possible “big gain” of the big bet.  

In a foreword to the OEOC report, Diane Ives of the Kendeda Fund offers four primary objectives (paraphrased here): 1) increase the number of employee-owned businesses, with an emphasis on encouraging the development of those that are run democratically and address the economic and racial wealth gap; 2) use grant dollars to leverage additional investments; 3) strengthen core elements of a supportive ecosystem; and 4) amplify coverage of employee ownership in the media. 

To do this, the foundation initially made investments in four organizations—the Fund for Employee Ownership (part of Evergreen Cooperatives), Nexus Community Partners, the ICA Group, and Project Equity. The first organization is an Ohio-based loan fund subsidiary of an employee-owned business nonprofit holding company, the second is a Twin Cities-based funding intermediary, and the last two are nationally focused nonprofit technical assistance organizations (with ICA Group based in Massachusetts and Project Equity based in California). Additionally, two years in, Kendeda made a $1 million grant to seed a joint-communications strategy of the four groups, branded as EO Equals (or Employee Ownership Equals).

Assessment of Impact

As Cooper and Palmieri point out in the report, success is hard to define. Toward the end, they offer the following possible definition, writing that “one guiding benchmark can be when business owners, workers, and communities everywhere are able to reap the benefits of employee ownership without encountering common, and perhaps arbitrary, barriers that define our current economic landscape.” If that is the benchmark, there is still evidently a long way to go.  

But the report—and a series of related podcasts—delve into some of the benefits that resulted from the grants, both for the field and the individual organizations. In terms of numbers, there are concrete, albeit modest, gains. To date, the $24 million grant investment has supported 903 jobs at 45 employee-owned businesses. The total value of employee-owner shares at those companies is $32.7 million. These numbers are not bad, but clearly, converting fewer than 1,000 jobs in four years in a national economy that employs over 167 million people is less than transformative.

However, there are additional benefits beyond the direct economic gains. One concerns field knowledge. The second area of gains is in the realm of public policy. 

Regarding the former, the grant support can free up cash to act as a form of research and development (R&D) funding that generates new knowledge for organizations that might have “spillover” effects throughout the field. As for policy wins, while the report undersells this, clearly more policy advances for employee ownership have occurred at the local, state, and federal levels in the past four years than in the previous two decades. At the state and federal levels, Kendeda’s support possibly had some indirect effect. In some cities, as described below, Kendeda’s grants had more direct effects. 

What Is the Field Learning? 

In a series of podcast interviews with grant recipients, some of the field learnings become more readily apparent. David Hammer, executive director of the ICA Group, notes that the funding provided by Kendeda allowed his nonprofit to shift from a reactive to a proactive approach. According to Hammer, the ICA Group focuses on employee ownership in four areas: homecare, childcare, temporary staffing, and a catchall group that Hammer calls “new ownership opportunities.” 

Not only did funding from Kendeda enable the ICA Group to staff up the four teams, but it also allowed the group to build field infrastructure—most notably by developing the Elevate Co-op, which Hammer describes as a secondary cooperative or a “cooperative of homecare cooperatives.” Elevate’s goal is to provide technical assistance support tailored for homecare cooperatives. Presumably, if this catches on, it has the potential to expand employee ownership in the homecare industry over time. 

[City support] helps validate employee ownership among retiring business owners who otherwise might be skeptical about selling…to their employees.

The Fund for Employee Ownership also invested in infrastructure. The loans made by the revolving loan fund that was seeded by Kendeda to buy businesses from exiting owners and convert them to employee ownership are being repaid. The repayments then support additional buyouts, creating a “self-sustaining loan fund,” according to chief investment officer Jennifer Webster.

The Role of Policy

With Nexus and Project Equity, while both groups provide a lot of technical assistance, the gains cited by participants primarily involved changing local economic policy. As Patty Viafara, who leads the Worker Owner Initiative at Nexus, emphasizes, “One of the key lessons…is how to create the right conditions for making transitions and for making cooperatives happen faster.” For Viafara, “working with cities and local government” has been vital to speeding this process. 

At Project Equity, cofounder Alison Lingane notes that funding from Kendeda helped the organization staff up. But Lingane also stresses the importance of the government partnerships that were generated. As Lingane explains, 

We have been able over the course of investment from Kendeda to engage with more than a dozen local government partners, most of them being cities and counties, but also small business development centers, workforce development boards. And at the state level, the manufacturing extension partnerships or MEPs. And all of these are really important partners from yes, [a standpoint of] awareness, but also from a pipeline development perspective. 

Support from city government, Lingane emphasizes, helps validate employee ownership among retiring business owners who otherwise might be skeptical about selling the business they have spent a lifetime developing to their employees. As Lingane comments, “Who’s to know this organization called Project Equity….The business owner…they may have never heard about us. But they certainly have heard about their city or their county [government].”

The Limits of Big Bet Philanthropy

So, has the “big bet” made by Kendeda paid off? One place where the gambling analogy fails is that unlike at the casino, it’s not obvious whether you’ve “won” or “lost” until many years after the bet is made. In her foreword, Ives herself is cautious, explaining, “It is still too early to know how this Big Bet has impacted the trajectory for employee ownership into the future.” The hope, she adds, is that the grants have “helped accelerate employee ownership towards a vibrant crossroads where creativity and capacity are converging in non-linear ways.”

For their part, Cooper and Palmieri observe in the report’s conclusion that, “the changes needed to expand employee ownership cannot be achieved by these organizations alone.” The work remains, they add, to organize and enlist “existing business, economic development, and policy networks to achieve what the broader goal always was—raising the profile and prevalence of employee ownership.”

In short, philanthropic support—even of the “big bet” variety—will never be sufficient to shift systems on its own. This is not to deny that large philanthropic investments can help accelerate movement growth. Philanthropy has a role to play, but there are no substitutes for organizing and movement building work to achieve broad society-wide cultural and policy changes. 

One can hope that the ultimate legacy of Kendeda’s support is to boost this vital work. Clearly, the grants did enable a few nonprofits to significantly expand their technical assistance work and elevated the visibility of employee ownership to local public officials. However, for long-term shifts of economic structure to occur, the kind of infrastructure being built by the Kendeda grantees needs to be built out far more extensively. As Esteban Kelly and Mo Manklang wrote in NPQ not long ago, it is here, by linking movement organizing to policy and ecosystem supports, that employee ownership and solidarity economy advocates can advance “the hard work of building a better world [to] usher in real and lasting change.”