Performance Measurement in Philanthropic Foundations: The Ambiguity of Success and Failure 9781138062412, 9781138062443, 9781315161631

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PERFORMANCE MEASUREMENT IN PHILANTHROPIC FOUNDATIONS

The growth of philanthropic foundations in numbers and significance raises two immediate questions. First, what makes for success and failure of foundations’ projects and activities? Second, what yardsticks or benchmarks are used to measure performance and track goal attainment? The purpose of this book is to delve deeper into the complex set of issues that lie behind the performance and wider impact of philanthropy. Performance Measurement in Philanthropic Foundations looks at the strengths and weaknesses of philanthropic foundations, which are independent of both the market and ballot box and yet open to signal and incentive deficiencies. The authors use in-depth case studies from different countries to illustrate the problems and challenge much of the conventional wisdom on foundation “success” and “failure.” The book also outlines the main contours of a proactive governance and management style to address those problems. Helmut K. Anheier is Professor of Sociology and President emeritus at the Hertie School of Governance, Germany. He also holds a Chair of Sociology and serves as Academic Director of the Center for Social Investment at Heidelberg University, Germany. Diana Leat is Visiting Professor at Cass Business School, London, UK. She is an independent researcher and consultant on philanthropy policy and practice, and spent a year at the Carnegie Trust UK developing the first research center for philanthropy in the UK (CGAP).

‘Philanthropic foundations have grown in size and policy importance around the world. With increased prominence, foundations are increasingly expected to successfully address complex public problems. This major and welcome new book contains an excellent overall analysis of the performance challenges of foundations, incisive foundation case studies, and valuable recommendations to improve foundation program success.’ Steven Rathgeb Smith, Executive Director, American Political Science Association ‘The performance of philanthropic foundations and their impact is of clear importance to analysts, practitioners and policy-makers alike. This book offers original and significant perspectives on why some foundations are more successful than others, and how the performance record of philanthropy could be improved.’ Cathy Pharoah, Visiting Professor of Charity Funding, Cass Business School, City University ‘A decade ago, Anheier and Leat’s seminal book “Creative Philanthropy” provided a fascinating and much needed rationale for foundations’ role in modern society. In this book, the authors follow suit and tackle the most complicated of issues: what makes for success, and why are so few foundations successful?’ Myles McGregor-Lowndes, Emeritus Professor, The Australian Centre for Philanthropy and Nonprofit Studies, QUT ‘The behavior of foundations has long been an enigma to students of philanthropy and policymakers alike. How do foundations make decisions, and why, how are these implemented and to what affect – these questions have long been ignored. In their book, Anheier and Leat address them head on and arrive at surprising answers. A “must-read.’’’ Stanley N. Katz, Director, Center for Arts and Cultural Policy Studies, Woodrow Wilson School, Princeton University

PERFORMANCE MEASUREMENT IN PHILANTHROPIC FOUNDATIONS The Ambiguity of Success and Failure

Helmut K. Anheier and Diana Leat

First published 2019 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2019 Helmut K. Anheier and Diana Leat The right of Helmut K. Anheier and Diana Leat to be identified as authors of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice : Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Anheier, Helmut K., 1954– author. | Leat, Diana, author. Title: Performance measurement in philanthropic foundations : the ambiguity of success and failure / Helmut K. Anheier and Diana Leat. Description: Abingdon, Oxon ; New York, NY : Routledge, 2019. | Includes index. Identifiers: LCCN 2018020867 | ISBN 9781138062412 (hbk) | ISBN 9781138062443 (pbk) Subjects: LCSH: Endowments—Evaluation. | Charities—Evaluation. Classification: LCC HV25 .A553 2019 | DDC 361.7068/4—dc23 LC record available at https://lccn.loc.gov/2018020867 ISBN: 978-1-138-06241-2 (hbk) ISBN: 978-1-138-06244-3 (pbk) ISBN: 978-1-315-16163-1 (ebk) Typeset in Bembo by Apex CoVantage, LLC

CONTENTS

List of figures List of tables List of boxes Acknowledgments 1

The performance enigma of philanthropic foundations Introduction 1 On performance 2 Greater relevance and expectations 7 The rise of demands for demonstrable effectiveness 8 The benign fallibility syndrome 12 Approaching success and failure 17

2

Taking a closer look: fallibility and ambiguity in philanthropy Digression toward the mean? 27 Attribution, assessment criteria, and timing 30 Complexity and dynamism 33 Multiple goals, competing goals 35 Politics 37 Roles, comparative advantages, and disadvantages 42

3

Case studies of benign fallibility, with Olivia Knodt and Charlotte Koyro Introduction 51 Walton Family Foundation, US 53 King Baudouin Foundation, Belgium 54

ix x xi xii 1

27

51

vi

Contents

Pew Charitable Trusts, US 54 Fondazione Cariplo, Italy 54 Robert Wood Johnson Foundation, US 54 Joseph Rowntree Charitable Trust, UK 54 Mozaik Foundation, Bosnia-Herzegovina 55 William and Flora Hewlett Foundation, US 55 Eberhard von Kuenheim Foundation, Germany 55 A framework 56 Case 1: Walton Family Foundation, US: charter schools funding 59 Overview of the case 59 The foundation 59 Description of the specific program 61 Origins and rationale 63 Design and implementation 65 Outcome and impact 67 Ambiguity and benign fallibility 70 Conclusion 73 Case 2: King Baudouin Foundation, Belgium: the training of imams 76 Overview of the case 76 The foundation 76 Description of the specific program 78 Origins and rationale 78 Design and implementation 81 Outcome and impact 84 Ambiguity and benign fallibility 86 Conclusion 88 Case 3: Pew Charitable Trusts, US: global warming and climate change program 91 Overview of the case 91 The foundation 91 Description of the specific program 92 Origins and rationale 92 Design and implementation 92 Outcomes and impact 96 Ambiguity and benign fallibility 97 Conclusion 99 Case 4: Fondazione Cariplo, Italy: FHS and social housing 102 Overview of the case 102 The foundation 102 Description of the specific program 104

Contents

Origins and rationale 105 Design and implementation 106 Outcome and impact 110 Ambiguity and benign fallibility 111 Conclusion 113 Case 5: Robert Wood Johnson Foundation, US: tobacco use program 115 Overview of the case 115 The foundation 115 Description of the specific program 116 Origins and rationale 118 Design and implementation 120 Outcome and impact 121 Ambiguity and benign fallibility 122 Conclusion 126 Case 6: Joseph Rowntree Charitable Trust, UK: Campaign for Freedom of Information 128 Overview of the case 128 The foundation 128 Description of the specific program 129 Origins and rationale 129 Design and implementation 130 Outcome and impact 130 Ambiguity and benign fallibility 132 Conclusion 134 Case 7: Mozaik Foundation, Bosnia-Herzegovina: EkoMozaik 136 Overview of the case 136 The foundation 136 Description of the specific program 137 Origins and rationale 137 Design and implementation 138 Outcome and impact 140 Ambiguity and benign fallibility 141 Conclusion 142 Case 8: William and Flora Hewlett Foundation, US: Neighborhood Improvement Initiative 145 Overview of the case 145 The foundation 145 Description of the specific program 145 Origins and rationale 146 Design and implementation 147

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Contents

Outcome and impact 147 Ambiguity and benign fallibility 149 Conclusion 151 Case 9: Eberhard von Kuenheim Foundation, Germany: a new start for Theresienthal 152 Overview of the case 152 The foundation 152 Description of the specific program 154 Origins and rationale 156 Design and implementation 157 Outcome and impact 159 Ambiguity and benign fallibility 161 Conclusion 163 4

Implications: living with benign fallibility Lessons learned 166 The benign fallibility syndrome revisited 170 Principal-agent-perspectives 170 Management perspectives 174 Toward proactive management 178

Appendices Appendix I: the cases 189 Appendix II: case-overarching questions 195 Index

166

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FIGURES

1.1 Foundation governance structure 2.1 Success and failure continuum

13 28

TABLES

2.1 2.2 3.1.1 3.1.2 3.2.1 3.2.2 3.3.1 3.4.1 3.4.2 3.5.1 3.5.2 3.6.1 3.7.1 3.7.2 3.8.1 3.9.1 3.9.2 4.1

Foundation task environments and performance Salience and style The charter school case in context Walton Family Foundation investment criteria The Training of Imams case in context Time line of KBF’s Training of Imams project The global warming and climate change program case in context The Fondazione Cariplo case in context Time line of major development in social housing The Tobacco Use Program case in context The Robert Wood Johnson Foundation’s tobacco control programs The Campaign for Freedom of Information case in context The Mozaik Foundation in context Major developments and setbacks of EkoMozaik The Neighborhood Improvement Initiative case in context The Theresienthal case in context Network Theresienthal Foundation types and capacity requirements

34 38 59 62 76 84 91 102 110 115 117 128 136 137 145 152 158 175

BOXES

4.1 4.2 4.3 4.4 4.5

Boards: operationalizing the deed Boards and staff: overcoming weak signals – building knowledge Staff: overcoming weak signals – building relationships Board and staff: work with complexity Evaluators

181 181 182 182 184

ACKNOWLEDGMENTS

This book owes much to the efforts of others. We would like to thank the Robert Bosch Stiftung for the generous support of the research project Foundation Successes and Failures: Implications for Policy and Management (https://tinyurl.com/ ycwkf4nd). The project served as a starting point of this book, and our fullest gratitude therefore goes to Ingrid Hamm, Olaf Hahn, and Thomas Leppert. We also wish to thank the following persons who made suggestions for which foundation projects to include in this research: Lori Bartczak, Eric Beerbohm, Antje Bischoff, Phil Buchanan, Janet Camarena, Nicholas Deakin, Paul Dekker, Meghan Duffy, Alnoor Ebrahim, David Emerson, Kathleen Enright, Richard Fries, Wendy Garen, Marita Haibach, David Hammack, Caroline Hartnell, Lucas Held, Rosien Herweijer, Roland Kaehlbrandt, Stanley Katz, Katrin Kowark, Mark Kramer, Christine Letts, Johanna Mair, Kim Meredith, Georg Mildenberger, Gerald Oppenheim, Anne-Claire Pache, Edward Pauly, Claire Peeps, Ryan Pevnick, Catherina Pharoah, Ulrike Posch, Woody Powell, Rob Reich, Kimberly Roque, Gerry Salole, Emma Saunders-Hastings, James A. Smith, Steven R. Smith, Georg von Schnurbein, Li Sha, Rupert Strachwitz, Volker Then, Megan TompkinsStange, Katherin Watson, Noomi Weinryb, and Annette Zimmer. Thanks are also owed to the foundation representatives and experts whose inside perspectives were invaluable for the presented case studies: Bruno Manno, The Walton Family Foundation; Walter Veirs, Mott Foundation; Benoit Fontaine, King Baudouin Foundation; Steven Schroeder, Robert Wood Johnson Foundation (formerly); Eileen Claussen, the Pew Charitable Trusts (formerly); Gian Paolo Barbetta, Fondazione Cariplo; Paul Brest, Hewlett Foundation (formerly); Regina List, Hertie School of Governance; and Georg von Schnurbein, Center for Philanthropy Studies, University of Basel. And last but not least, at the Hertie School, we would like to thank our research associates Olivia Knodt and Charlotte Koyro for their contributions to the case studies and support of the publication process, as well as Zora Chan and Doroteja Enceva.

1 THE PERFORMANCE ENIGMA OF PHILANTHROPIC FOUNDATIONS

Introduction This book is about the performance of one particular kind of institution, the philanthropic foundation – understood as an independent, private endowment dedicated to serving a public purpose by making grants to recipient organizations and individuals.1 We try to advance a central argument, which we lay out in more detail here and illustrate with a range of case studies: philanthropic foundations are among the freest institutions of modern, democratic society. They are beholden neither to market expectations nor to the ballot box. This dual independence, combined with the governance structure of foundations, is a source of relative strength. At the same time, however, the unparalleled self-sufficiency and autonomy of foundations expose them to chronic signal and incentive deficiencies. We label these deficiencies the benign fallibility syndrome, based on Seibel’s seminal diagnosis of a similar phenomenon among nonprofit organizations generally.2 Why is it important to explore the benign fallibility syndrome of philanthropic foundations? After all, as some would suggest, foundations committed to charity and the public good can do no wrong. Are they not voluntarily making private funds available to charitable purposes of many kinds? So why worry about their performance? Such views are increasingly at odds with reality and for three reasons. First, in most advanced countries, foundations enjoy significant tax privileges, so that the wealth they command includes, to some considerable degree, public monies as tax forgone ( Simon et al. 2006). Second, foundations have substantially increased in numbers and wealth since the 1990s and constitute a growing field of considerable potential, both nationally and internationally. Third, foundations are not about charity only. They are much more: many address complex social, cultural, and economic problems (see Hammack and Anheier 2013) and seek creative solutions to seemingly intractable challenges. Yet compared to

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business, government, and nonprofit organizations, they constitute a set of institutions about which we know relatively little, in particular in terms of their performance and contributions. What is more, we see the benign fallibility syndrome not as the exclusive enclave of philanthropic foundations – although, given their governance structure, they represent the clearest case of organizations exposed to weak signals and weak incentives. There are other types of organizations that share at least some of the characteristics that we associate with this syndrome, including nonprofit organizations, quasi-governmental organizations and specialized public agencies, employee-owned corporations, and cooperatives. While these are not explicitly covered in what follows, we nonetheless hold that the lessons we can draw from examining foundations bear at least some relevance to other organizational forms as well.

On performance Therefore, in this book, we seek to add to our understanding of foundation performance and the wider contributions they make to society. In this context, we regard the benign fallibility syndrome as a key to understanding what could be called the performance enigma of philanthropic foundations: many foundation projects achieve ambiguous results even though they may have been well-intentioned, carefully planned and executed, and assessed against agreed-upon performance standards. By ambiguous results, we mean projects or programs with neither clear success nor failure records. Instead, they end up somewhere in between, being both while not sure which is which – a gray area of “yes, but” and “no, however.” While these projects have clear beginnings in terms of goals, plans, and resources, they often are without precise endings, attribution, and sustainability. Such inconclusive outcomes seem puzzling, given the significant financial resources many foundations have available, the often-careful development and implementation of project activities, and the long-term investments in financial and human capital made. Put differently, the cases we examined do not reveal serious miscalculations, mismanagement, or negligence, let alone malfeasance of any kind. To the contrary, and for reasons we try to fathom in this book, foundations were well-intentioned and doing the right things – yet their projects somehow tend to yield results that are rarely clear successes or failures but somewhere in between with frequently ambiguous and sometimes indeterminate outcomes. Examples reviewed in this book (see Appendix) include the Robert Wood Johnson Foundation (RWJF) in the US, seeking to reduce tobacco use by children and young people only to remain uncertain whether millions of grant dollars spent actually made a difference; the King Baudouin Foundation (KBF) in Brussels, wanting to improve understanding of Islam in the country and to enhance the integration of Muslim communities into Belgian society, only to be left puzzling over what they had actually achieved; or the Joseph Rowntree Charitable Trust (JRCT) in England, wanting to inf luence the British government to introduce the Freedom of

Performance enigma of philanthropic foundations

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Information Act, frequently feeling unsure about what turned out to be a protracted process with no clear ending. These, and the other cases we examine, have in common that they seek to address a complex problem or set of issues in furtherance of their deed or mission. RWJF is charged with helping to “raise the health of everyone in the US to the level that a great nation deserves, by placing well-being at the center of every aspect of life” (rwjf.org). KBF’s mission is to contribute to a “better society” and to be an “actor for change and innovation, serving the public interest and increasing social cohesion in Belgium and Europe . . .” (kbf-frb.be). Finally, for JRCT, the mission is to “engage in philanthropy which challenges the existing power imbalances in society to effect real change” ( jrct.org.uk). Thus, all three foundations have hugely ambitious missions, pursuing goals at the very heart of social policy and involving enormously complex tangles of inter-related problems. And all three foundations ended up achieving ambiguous results or outcomes. Arriving at ambiguous outcomes involves a significant degree of what economists call “satisficing,” a behavior that searches for acceptable results when what is optimal is not only difficult to achieve but also hard to define. In his Nobel laureate speech, Herbert Simon (1979) put the dilemma clearly: decision-makers can seek to satisfice in two ways: either by finding optimum solutions for a simplified world view based on assumptions that may not be proven or by finding satisfactory solutions for a more realistic world view in which expectations as to outcomes have been adjusted. Could it be that the performance enigma of foundations is a product of a pronounced tendency to engage in both ways of satisficing under conditions of uncertainty when results are not only hard to achieve but hard to define and measure in the first place? Similarly, sociologists suggest that decision-makers and managers, becoming aware of the discrepancy between set and achieved goals, show a typical response pattern: goal displacement. Sometimes openly but often in subtle ways, they substitute goals that seem difficult with ones assumed easier to achieve. To maintain legitimacy, they use explanations they believe acceptable to main stakeholders and thus rationalize suboptimal outcomes. Over time, such legitimatizing accounts become an ongoing framing process of routinized myth-building justifying suboptimal outcomes and the organizational behaviors involved (Meyer and Rowan 1977). Powell and DiMaggio (1991) propose that such processes can affect entire groups of organizations to create, through collective acts of goal adjustments, an acceptable framework for suboptimal performance. Could it be that, in the face of uncertainty, the performance enigma of foundations is the result of their proneness to mythmaking and legitimacy framing? In psychology, ambiguity refers to the perceptions of objects, such as abstract paintings, that allow for two or more different interpretations; likewise, a sentence or a word can project inconclusiveness as to its meaning, or behaviors and indeed organizational performance can be comprehended in different ways and lead to different conclusions (McLain et al. 2015). Ambiguity thus allows for different interpretations and leaves a certain vagueness of information. Put differently, what

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some stakeholders might see as a successful outcome of a foundation project, others view more as a failure, even though we are dealing with the same set of activities, albeit judged differently. Such differences are more likely when the problem or issue addressed is complex, as is the case with all three foundations mentioned earlier. Could it be that the performance enigma of foundations is essentially a product of ambiguous interpretations of complexity? Interpretations that wield power and enjoy legitimacy are more likely to prevail in situations of ambiguity (Meyer and Rowan 1977). Not surprisingly, the term is also used in diplomacy as a tacit play of power and legitimacy in seeking consensus: constructive ambiguity. The term refers to the deliberate use of imprecise language in the drafting of agreements or statements on sensitive issues in the hope of securing approval among conflicting parties or at least avoiding negative repercussions through the very phrasing of the document. Berridge and James (2003) use the UN Security Council’s Resolution 242 of November 1967 on the Six-Day Arab – Israeli War as an example: the resolution required the “[w]ithdrawal of Israeli armed forces from territories occupied in the recent conflict.” It did not demand withdrawal from the territories occupied in the recent conflict and “thereby left unclear the question of whether Israel was obliged to engage in a complete or only partial withdrawal” (2003:51). Could it be that foundations, too, engage in constructive ambiguity in trying to convince stakeholders about their intended goals and realized achievements? We see constructive ambiguity closely related to the benign fallibility syndrome and as part of creating and enacting a legitimating framework around inconclusive outcomes. Good examples can be gleaned from president’s messages of annual reports or prominent places on website portals. The following comes from the Robert Wood Johnson Foundation: In our practice of philanthropy, this is where the “Kilimanjaro Effect” comes into play. Step by step we progress onward. We may have to “discover the new terrain” and new ways to traverse it. It may take us a generation, or two or three, but we have the will and the means to hang in there until momentum occurs, progress is secured, and evidence confirms that the change we seek is producing positive results. If it is not – well, we have learned the hard way to know our limits, when to step, when to pause, when to stop, suspending the climb for a better route on a better day. Ours is a spirit of resilience and resolve our founder and namesake built into our philanthropic DNA from the very start. (Lavizzo-Mourey 2012) Another indication is the frequent use of verbs such as enhance, enrich, augment, develop, advance, and amplify in foundation project descriptions and internal reports,3 all of which leave much room for interpretation. In a wider context, foundation executives like the president of the Silicon Valley Community Foundation, Emmett Carson, explains, “The reality is, very few evaluations, under the best of

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circumstances, are unambiguous . . . There’s always some failure and there’s always some success” (Plummer and Forti 2013). Toepler offers a good example of how the constructive ambiguity of foundations’ performance could be invited by the organizational field they operate in, in this case arts and culture in the US: [F]oundations are finding themselves in an ever-expanding free philanthropic market. . . . However, the market is not (yet) sending clear signals, and information about where resources are best deployed to maximize impacts is diffuse and hard to come by. (2010: 303) DiMaggio (1986) also points to the information problem facing foundations in this field and sees the cost of obtaining and evaluating information as a substantial constraint. In response, foundations may have an incentive to engage in constructive ambiguity as a cost avoidance strategy. The benign fallibility syndrome of foundations, which makes them prone to satisficing,4 myth-creation, and constructive ambiguity is rooted in their basic governance structure. By this, we mean the relationships among, and role responsibilities of, boards, management, staff, and grant recipients. The syndrome, as we will follow up on later, is ultimately about the principal-agent structure5 of foundations. It also speaks to central tenets of organizational theory, especially as relating to the behavior of organizations under conditions of high complexity, volatility, and varying degrees of politicization. By performance, we mean less its quantitative measurement through indicators and benchmarking – a practice that has become standard for corporations and public agencies – but something more fundamental: how can we judge the success or failure of projects that operate in highly complex, fast-changing, and often contested fields; that address problems that are ill understood, riddled with externalities, and involve implications of many kinds that may not be anticipated; where declaring success or failure depends as much on normative preferences as on facts, inviting further contestation; and where, over time, assessments of performance factors and outcomes vary ex post as well as ex ante (“moving goal post”)? Tackling social problems to improve society is at the root of all three foundations’ missions. Their deeds invite – even require – them to engage with, and operate in, precisely such complex problem and task environments. In this respect, the foundation faces two challenges in judging its performance: first, to assess how its program or project is performing relative to set objectives, and second, to ascertain whether measured improvements can in fact be attributed to the foundation’s interventions. For example, both health behavior and substance abuse are complex physical, psychological, social, economic, and cultural phenomena, involving multiple laws and regulations, numerous stakeholders, and thousands of agencies, corporations, and nonprofits as well as diverse population groups. How would the trustees and program managers of RWJF know that their

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activities in particular have indeed had a measurable effect on teen tobacco use? By what calculus would they know that their expenditures in terms of grants and operations had paid off, and based on what measures, especially because teen smoking rates were declining already and continued to do so throughout the program? What part of the success achieved can RWJF attribute to its projects and claim as its own? Similarly, when and on what basis could KBF rightly state that better training of imams contributed to better understanding of Muslim communities and their integration into Belgian society? How would JRCT know that their efforts to fund advocacy helping the Freedom of Information Bill through Parliament led to desired legislative action, rather than it being the result of someone else’s efforts? And how would they know that passage of the bill actually did change power imbalances and effect real change in society in line with their mission? As we have argued elsewhere (Anheier and Leat 2006; Leat 2016), rather than lament the obvious complexity of the tasks foundations shoulder or question why they take on seemingly impossible tasks, we find them ideally situated for operating in precisely such environments and for addressing such apparently overwhelming challenges. Their very constitution, detailed here, is the source of a profound political and financial independence that allows them to take risks and embrace uncertainties, to take the longer view, to accommodate unanticipated developments, and to embrace contestation. Yet if this is the case, how can foundations gauge their performance, how do they know that their projects are not only “good but great,” to paraphrase a popular approach to enhancing nonprofit performance ( Collins 2001, 2005)? The case studies in this book are about foundations engaged in complex problem solving of public issues and what this means for performance and, ultimately, outcomes. The cases range from experimenting with innovative solutions for financing, constructing, and managing social housing (Cariplo Foundation, Italy) to developing policies for reducing greenhouse gas emissions (Pew Charitable Trust, US) and from revitalizing an insolvent glass-manufacturing plant and safeguarding a particular craft heritage (Eberhard von Kuenheim Foundation, Germany) to community relations and employment (Mozaik Foundation, Bosnia-Herzegovina). These foundations address complex problems that cannot be approached by some application of known solutions, let alone linear deductions from prior situations. Combatting climate change is an obvious example here. Such problems not only involve multiple components and different causal mechanisms but also often interact with other problems or are nested such that one problem entails another and then another, like the proverbial Russian dolls. For example, KBF linked two problem sets by aiming to increase the understanding of Islam in Belgium and enhance the integration of Muslims in society: the decision to advance the training of imams as the solution by providing the nexus between understanding and integration. The combination, however, opened up a range of nested problems that could not have been foreseen. The Eberhard von Kuenheim Foundation tried to meet the dual objectives of heritage preservation, a public good, and market

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success for the company’s products, a private good, only to see changing economic conditions intervene in an already complex goal relation. Some complex problems are wicked problems ( Churchman 1967) in that they involve most of the following characteristics: they are difficult to define, involve normative even ethical judgments, are multi-causal, have many unforeseen consequences, are unstable, are difficult to approach through existing institutional frameworks and administrative systems, and have been the subject of previous policy approaches that typically ended in failure (Australian Public Service Commission 2007; Ferlie et al. 2013). Climate change, obesity, drug and alcohol addiction, domestic violence, migration, or poverty alleviation are cases in point. RWJF’s attempt to address teenage tobacco use meant attacking a wicked problem, whereas JRCT worked on a complex though not a wicked problem when approaching the Freedom of Information Act. At the outset, KBF may not have fully understood the true complexity of the terrain when embarking on the Training of Imams project. Likewise, the Eberhard von Kuenheim Foundation did not face a wicked problem, although the challenge of meeting the dual objective turned out to be complex and full of uncertainties. The more wicked a problem, the more uncertain and complex performance assessments are likely to become and the more likely will tendencies toward benign fallibility take hold. Satisficing, myth-creation, and constructive ambiguity are more common around wicked problems. At the same time, as we will argue here, foundations may be better suited to approach complex problems than other organizational forms and especially situations where one does not know what one does not know when dealing with the unexpected and unpredictable. Thus, we are interested in the performance of foundations addressing complex problems in order to better understand what makes them more or less likely to succeed when the very notions of success and failure are ambiguous, changing, and most likely contested. What aspects of the problem definition, risk assessment, resource allocation, management, leadership style, timing, and phasing of the project or program contributed to its outcome? How did the foundations plan when it was difficult to do so? How flexible were they? Did they revisit assumptions in the initial assessments, and did they develop explicit theories of change and revise them over time? Did they reconsider prior management decisions and even alter course altogether? Were they willing to look externally for partners and allies, entering into coalitions despite the inevitable complications – not least regarding time, consensus building, potential reputational risk, and difficulties in claiming “ownership” of results? And how did they manage ambiguity?

Greater relevance and expectations The question of what makes for the success and failure of their projects and activities is becoming increasingly relevant as foundations have experienced a veritable boom, growing in numbers and wealth in many countries. Over the last two to three decades, countries as different as the US, Germany, and Switzerland have

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seen the numbers and assets of foundations reach historic levels: over 30% of the nearly 90,000 US foundations were founded after 2000, as were 54% of the over 19,000 German and over 40% of the 13,000 Swiss foundations (see Toepler 2017: 2; Anheier et al. 2017: 1; Eckhardt et al. 2016: 4). Even without precise comparative figures on asset sizes and expenditures, it seems reasonable to assume that today more foundations exist and command more assets that at any other time in modern history. But increases in numbers and assets are not the only reason to look more closely at foundations; perhaps equally important are the expectations of many governments and even philanthropists themselves that foundations could shoulder more responsibilities and thereby help relieve often tight public budgets (Boris and Steuerle 2006; Harrow and Jung 2011; Leat 2012). Here, foundations are not merely seen as a resource to provide immediate relief in emergencies and other unforeseen needs; the expectations go well beyond some form of temporary aid: foundations are seen as a complement to, or even substitute for, public action in a wide range of tasks in education, health and social care, humanitarian assistance, culture, and so on (see Prewitt 1999; Fleishman 2007; Hammack and Anheier 2013; Anheier 2018). For example, foundations in effect acted as substitutes for local government in Detroit when a consortium of regional and national funders pledged $370 million to minimize pensioner losses and save the city’s art collection ( Ferriby 2016; Kennedy 2014; Kennedy et al. 2014). Similarly, one of the cases presented in this volume, the Walton Family Foundation, acts as an “alternative” to government in its promotion and funding of charter schools. By contrast, the RWJF tobacco program did not seek to substitute for or offer an alternative to government but rather aimed at complementing other efforts to reduce teenage smoking. Prewitt (1999) and others suggest that the primary role of foundations is to act as change agent and innovator. Innovations and their promotion could be in social perceptions, values, relationships, and ways of doing things, often aimed at policy changes in the broadest sense. The Ford Foundation’s funding of Sesame Street is one high-profile example of innovation ( Ford Foundation 2017), as is the establishment of the American Research University by the Rockefeller Foundation (see Hammack and Anheier 2013; Wheatley 2010 for overview). Less wellknown examples include the Diana, Princess of Wales, Memorial Fund’s work to embed teaching on palliative care into medical education in sub-Saharan Africa (www.dianprincessofwalesmemorialfund.org) and the Rosenberg Foundation’s work linking child poverty with the unsettled legal status of many migrants in California (Anheier and Leat 2006). The innovation role especially brings up performance issues: as innovation implies uncertainty and risk-taking, trial and error, what are appropriate measures for how well a foundation operates when current failures could indeed pave the way for future successes?

The rise of demands for demonstrable effectiveness As Steve Jobs, the founder of Apple Inc., famously stated: “Embrace every failure. Own it, learn from it, and take full responsibility for making sure that next time,

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things will turn out differently” (as cited in Haden 2015). Or “You gotta act and you’ve gotta be willing to fail, you’ve got be willing to crash and burn. You know with people on the phone, with starting a company, whatever, if you’re afraid of failing you won’t get very far” (as cited in Tukaki 2015). Accounting for success and failure, demonstrating efficiency and effectiveness is nothing new in the business world, as in theory at least, only the effective thrive and survive. “Success” may be measured by customer satisfaction, by rising profits, by share price, and so on. In the public sector, the rise of demands for demonstrable effectiveness is more recent and was a key element in what became known as New Public Management (NPM), adopted in various countries since the 1990s, albeit with some variation (Hood 1991; Ferlie 1996; Reichard 2001). The key characteristics of NPM included increased attention to financial control, concern with efficiency and value for money, a stronger managerial spine, clear target setting and monitoring of performance, extension of financial and professional audit, stress on responsiveness to consumers, deregulation of the labor market, reduction in the self-regulating power of provisions, more entrepreneurial management, new forms of governance with marginalization of elected representatives, and a move to a board of directors model (Ferlie et al. 1996: 11). In the wider nonprofit sector, the origins of the pressure to demonstrate results has been attributed to the significant roles nonprofit organizations now play in public service provision, the need for accountability for public money, some highly visible scandals involving nonprofits, fiscal problems of cities leading to questioning of the value of nonprofits’ tax-exempt status, commercialization within the nonprofit sector leading to questions regarding its legitimacy, and questioning of the independence of nonprofits because of funding, corporate, and accounting scandals ( Carman 2009: 375; Anheier 2014: 505–506, 520–521). In the foundation world, the notion of doing more with less, or achieving more with limited resources, is closely related to the rise of strategic philanthropy. Brest (2015: 2) defines strategic philanthropy in terms of three elements: (i) donors articulate and seek to achieve clearly defined goals that are (ii) pursued based on evidence-based strategies for achieving those goals and (iii) monitored for progress toward outcomes and assessed success in achieving them in order to make appropriate course corrections. It is the rationalization of philanthropy, part of its professionalization, and a concomitant spillover of managerial cultures. In the past, doing good was good enough for many philanthropists. Since the 1990s, various academic commentators raised high-profile arguments suggesting that, for various reasons, foundations provided poor value for money (Porter and Kramer 1999; Letts et al. 1997). A growing wave of proposals sought to professionalize philanthropy and bring mind-sets and practices closer to business, on the one hand, and new public management approaches, on the other. Foundations, it was suggested, needed to become more focused by better aligning needs and resources ( Frumkin 2006), demonstrating their value (Kramer et al. 2007; Brest 2012), or learning from business investors and entrepreneurs (Bugg-Levine and Emerson 2011). Venture philanthropy and strategic philanthropy became popular labels suggesting approaches different from past practices.

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US foundations began to foster evaluation as a force for accountability and transparency in the 1980s, followed by a focus on effective grantmaking practices by the end of the 1990s. In 2010, the Foundation Center developed TRASI – a searchable expert-reviewed database of over 150 approaches to measuring the impact of social programs and investments (trasi.foundationcenter.org). The vogue for talking in terms of “investing” rather than grantmaking, the emphasis on “impact” rather than simply “doing good,” and the entry and influence of young, successful entrepreneurs from Wall Street and Silicon Valley into the philanthropic sector undoubtedly played a part in these developments. Demonstrating results has now become one of the key issues in the foundation world in the 21st century (see Hammack and Anheier 2013, Chapter 5). In the US, Grantcraft (www.grantcraft.org), supported by the Ford Foundation, became a major platform for the development and dissemination of philanthropic actions leading to successful outcomes. GEO, standing for Grantmakers for Effective Organizations, brings together over 5,000 grantmakers worldwide to improve grantmaking practices (www.geofunders.org). In Europe, Tomei (2013), for example, suggests that demonstrating impact has become an “operational necessity” for foundations. The UK Cabinet Office (2014a, 2014b) has issued a working paper and “tool” to enable foundations to achieve “total impact.” The Association of Charitable Foundations has suggested that by 2022, planning and assessment of impact will become the norm (Pharoah et al. 2017); the Association of German Foundations, for example, offers information on the issues of impact investing or mission-related investing, as well as their evaluation (BVDS 2017); and the Australian Center for Social Impact features high-performing social investments (csi.edu.au). Despite growing acknowledgment of the importance of demonstrable effectiveness, there are some caveats. Boris and Winkler (2013: 69) and others report that “few foundations implemented internal processes to measure their own performance, or invested in evaluating their grantmaking programs.” Ostrower (2004) suggests that foundations typically define effectiveness in very broad general terms, such as good grantmaking, attaining goals, performing well financially, and so on. “What various foundations do have in common is a pervasive failure to institutionalize a regular and ongoing process by which they establish standards and evaluate themselves in relation to these standards” (2004: 9). Ostrower goes on to argue that “without voters or consumers to do it for them, foundations must impose a set of disciplines upon themselves to ensure that they are regularly and systematically evaluating their performance” (2004: 9). These observations point to basic concerns: to what extent do, and should, performance criteria in terms of efficiency and effectiveness apply to foundations in the first place? What is different about foundations compared to other organizational forms that allow for a seemingly collective acceptance of demonstrable effectiveness, on the one hand, and a lackluster practice of performance measurement, on the other? Does this suggest a disjunction between cultural expectations from outside the foundation field that have become internalized through

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professionalization and related processes and the basic structures and processes of doing philanthropy? Various explanations have been advanced for the rise of demands for demonstrable effectiveness. Power (1994, 2009) links the rise to the growth of the “audit society,” where ever more realms of public and private life are subject to monitoring and reporting. Dahler-Larsen (2013) suggests three broad types of explanation for the rise of demands for measurement: historical explanations citing, for example, belief in the value of social science and a struggle between government departments for knowledge-based arguments for policymaking; functional explanations citing the growing need for efficiency in policymaking; and, finally, political explanations involving neo-liberal doctrines of choice and competition. In line with the sociological reasoning mentioned earlier, we suggest that evaluation is “assisted sense-making,” which “by way of ‘artificially’ constructed methods and procedures, helps construct data which indicate whether particular activities are good or good enough, whatever that means in particular contexts” (Dahler-Larsen 2013: 2, our emphasis). Demonstrating effectiveness is institutionalized in management practice, legislation, and monitoring systems, becoming “a taken-for-granted phenomenon, which needs no further justification” (2013: 5; see also Derlien and Rist 2002: 452). In other words, this is the very phenomenon economists associate with satisficing and sociologists identify as ceremonial enactment of legitimating myths. Whatever the explanation, evaluation is now seen as obligatory across sectors – business and government, as well as nonprofits, and it seems increasingly prevalent in philanthropy. For Dahler-Larsen, evaluation is carried and maintained by cognitive scripts, methodologies, and ways of thinking about “programs,” “activities,” and “outcomes.” Last but not least, to an increasing extent social norms and expectations take evaluation for granted, not questioning its instrumental function in each and every case, but prescribing evaluation as the proper thing to do for modern organizations like ours and for professional people like us in a time like this. (2013: 7) The relationship between the rationalization of foundation management and demands for performance assessment help explain how evaluation can become a legitimate and taken-for-granted organization ritual, the virtues of which sometimes lie in its congruence with dominant cultural patterns, not in its effects on better outcomes, better policies, or more sophisticated decisions. Evaluation may as well just create a very superficial form of legitimacy or simply more uncertainty. (2013: 8) The “measurement movement” is thus intimately related to the rise of managerialist approaches in both the public and nonprofit sectors, and arguably, these are

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also related to a particular meta-theory of social change. When, in the 1980s and 1990s, NPM overtook old ways of thinking and managing in the public sector, by extension, elements of NPM began to influence the nonprofit and philanthropic sector as well. The adoption of performance measures in philanthropy came at a time in the 1980s and 1990s when many foundations recognized their limits and began to reflect on impact and sustainability (see Hammack and Anheier 2013, Chapter 5). From a sociological perspective, according to Powell and DiMaggio (1991), we have here a clear case of mimetic isomorphism, where organizations adopt elements from other sectors or organizations they see as more successful. They do so not only to improve performance but also to enhance their legitimacy (see also Meyer and Rowan 1977). In other words, the rise of performance measures has as much to do with strengthening foundations’ place in society as a legitimate vehicle for using private funds for public purposes as it does with actual improvements in what foundations do.

The benign fallibility syndrome What is different about philanthropic foundations? Why do they deserve special attention? It is ultimately not the growing scale and scope of foundations alone that makes them worth investigation in terms of their performance but also their special form and their potential for addressing complex problems. However, the key questions are not only about their performance in terms of efficiency and effectiveness compared to other nonprofits, public agencies, or businesses, but ultimately, it is also about their legitimacy to operate as independent private actors in the public realm and to do so with significant privileges on top of limited regulatory oversight and largely independent of their actual performance. Of course, foundations vary significantly across countries and over time. But, in essence, they are a special kind of private organization different from membershipbased associations, liability-based corporations, and public agencies. In other words, in terms of demanding performance, they have no membership base that could serve as shareholder equivalents, no owners holding capital they could withdraw, and neither an electorate nor (in most countries) a significant external oversight agency threatening the legitimacy of those running the foundation. Their basic structure is that of an independent endowment originating from a deed that is subsequently overseen by trustees to meet the purposes or objectives set out, typically, in perpetuity. Neither the donor nor the trustees own the foundation, the latter holding donated assets in trust by employing them to realize the objectives set out in the deed or charter. In terms of its basic governance structure, the foundation is an institution with a silent principal (in the form of a deed), trustees acting as de facto principals, and managers and program officers de jure in an intermediary position; they are trustees’ agents, on the one hand, and principals to grantees, on the other (Figure 1.1). In other words, the governance structure of foundations includes three

Performance enigma of philanthropic foundations

Donor as silent principal FIGURE 1.1

Trustees as acting principals

Managers as agents for trustees and principals for grantees

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Grantees as agents

Foundation governance structure

critical relationships: between deed or donor and trustees; between trustees and the operative foundation management; and between management and grantees. The first critical relationship is about the role of the deed or donor intent and how trustees are to interpret it in setting goals. Thus, one way to approach the success and failure of foundations is the extent to which projects are true to donor intent, either in respect of their implementation or actual achievement (see Frumkin 2006). In this respect, while most foundations are somewhere in between, there are two extremes: if a deed is broad and open, the foundation runs the risk of finding little guidance in matching purpose and activities, inviting politicking and possibly even encouraging performance failures associated with “headless, nomadic organizations.” By contrast, if deeds are too narrow, too specific and fixed, they constrain the board’s decision-making options and future strategic space and may risk moving the foundation toward obsolescence. The Buck Trust (Augsburger et al. 2007) case illustrates the fixed, narrow deed that is non-functional in the sense that it does not enable the foundation to realize its full potential – although in part through no fault of the donor her- or himself. Beryl Buck died on May 30, 1975, leaving a sizeable fortune of millions of dollars for providing care for the needy in Marin County, California, which happens to be one of the richest areas in the entire US. At the end of a lengthy probate process, the endowment had grown to $260 million. The San Francisco Foundation was given authority to direct the distribution of income in accordance with the deed, which required that income be distributed not later than the end of the year following the year of receipt. The problem was that too few opportunities existed in Marin County to expend the level of funds required by US tax regulation. The foundation entered into a lengthy court case, seeking permission to spend some of the money outside Marin County – the need, the foundation argued, was greater and the sum of money was now such that it could no longer be usefully absorbed within the county (Augsburger et al. 2007). By contrast, Andrew Carnegie left a broad and open deed, providing much room for interpretation and change. In November 1911, Carnegie transferred $25 million in stocks and shares to be applied for the purposes of the corporation (foundation) as stated in the existing charter. These purposes were promoting knowledge and understanding in the US through technical schools, higher learning, libraries, scientific research, and so on. But Carnegie added that he was aware that conditions change, and so he gave trustees full authority to change the corporation’s policies or causes when, in their opinion, this was necessary or desirable.

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Thus, the governance structure for foundation entails built-in and often underlying tensions between the original donor intent, board interpretations, and changing conditions over time. This dilemma poses challenges to both the relevance and the practicality of deeds often formulated for an indefinite time period. At the core of such tensions is the question of whether private funds can address public purposes better if donor intent can be reinterpreted and changed – in part or completely – over time. What is more, should there be recourse to change the original stipulations of the deed completely, and should donors decide on time horizons other than perpetuity and make adjustments over time (see Gary 2010)? This would require trustees to assume the role of principal more fully. The relationship between trustees and management is the second governance component. It is complicated by the dual role of foundation managers as intermediaries between the interpretation of the deed by trustees as principals and grantees as ultimate agent. For example, in its early years, the Ford Foundation was family led and focused its work in its home area of Michigan. When Edsel and Henry Ford died, the foundation became the largest in the world, and the trustees commissioned a major review of its way of working and how to implement its very broad mission of promoting scientific, educational, and charitable purposes for public welfare. The tricky relationship between trustees and management was highlighted when, on December 11, 1977, Henry Ford II wrote a letter resigning from the board. In the letter, he made various criticisms of the foundation, including that it was doing too much with too little and appeared to believe that only programs it ran itself were worth anything. He also complained that “the Foundation is a creature of capitalism” but that “it is hard to discern recognition of this fact in anything the Foundation does” (Weymouth 1978). In effect, Henry Ford II is complaining that management has captured the foundation and divorced it from its origins. The relation between the board and management arises from various inherent characteristics of the relationship and crystalizes in the tension between law and practice. In law (in most countries), the board is responsible for everything done in the foundation’s name, but in practice, managers and program officers tend to have great strategic and operational power. Managers are recruited for their knowledge and expertise; they are full-time, whereas board members are mostly part-time. Managers control the content and flow of information, with board members as recipients. Furthermore, while in theory the board oversees the work of managers, it is not in either party’s interest to admit failure – managers obviously want to be seen as doing a good job, and trustees want to hear good rather than bad news, not least because it is they who are ultimately responsible. But unlike in business corporations or governments, in case of failure or bad performance, there is no de facto principal to threaten and, if need be, execute negative sanctions like bankruptcy or loss of office. Hence satisficing behavior, constructive ambiguity and mythmaking can easily come into play. In this respect, Boesso et al. highlight the tensions between

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the conflicting goals of the principals (donors, beneficiaries, and community) who are interested in creating social value, and those of other agents, who may be more interested in their careers, short-term success, developing their own network and consolidation within their own purview the foundation’s scope, power, finances, and so on. (2013: 3–4) The third component is the relationship between the operative management of a foundation and its grantees. Again, this is a relationship riddled with tension and ambiguity. Skloot (2001) has noted the frequent criticism of foundation managers as arrogant and overbearing in their relations with grantees. Foundation managers are the gatekeepers to funds that grantees desperately seek, and there are many more potential grantees than foundations – demand outstrips supply. But various authors (Prewitt 1999; Ostrander and Schervish 1990; Ylvisaker 1987) note the way in which foundations and grantees live in a tense state of mutual interdependence. For example, US grantmaking foundations grantees are required by law to fulfill their mission by meeting the pay-out requirement of spending about 5% of their fair-market assets each year. The relationship between the foundations and grantees is further complicated by the moral hazard that arises from a divergence between the signals sent by grantees and the capacity of the foundation to put these signals to a full test. Here we are dealing with information asymmetries between grantee and grantor, similar to the situation analyzed by Spence (1973, 2002) for the US job market between employers and applicants. Employers, unable to fully judge the true performance capacity and skills of an applicant, use signals such as degrees and diplomas to reduce uncertainties in making hiring decisions, thereby lowering their subjectively felt risks while not taking unrevealed risk into account. Foundations, too, make decisions based on signals such as grant proposal and grantee credentials. But unlike for businesses, there are no clearing mechanisms equivalent to market disciplines in sanctioning bad signals, and unlike in the public sector, there are no political ways and means to vet proposals in democratic arenas. In market situations, sanctions and incentives could act quickly and potentially help restore some equilibrium between supply and demand. In politics, foundations could be confronted with opposing majorities, put in a minority position, or have their proposed actions blocked by procedural checks and balances. By implication, foundations face a sunk cost problem: while the process of grantmaking puts the foundation in a position of power unchecked by market forces and the popular will, grants, once made, empower the grantee in terms of performance and outcomes. While grant agreements may imply some quid-proquo, they are closer to a unilateral transfer of resources than a fee-for-service contract. In other words, the position of a foundation weakens after a grant has been decided, moderated perhaps by some conditionality attached to disbursements, but ultimately, actual performance toward intended results becomes indirect, mediated through grantees.

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Signals, too, become indirect and mediated, subject to grantee reports and third parties. As Grønbjerg et al. (2000) note, the frequent lack of direct performance criteria make personal relationships between grantees and managers so crucial. On the one hand, trust is a critical component of an effective relationship between grantors and grantees, but, on the other, it can create apparent or real collusion. When grants continue over a period of years, this long-term, often close, relationship may be difficult to monitor and even more painful to end. Using the Twin Cities as an example of signaling problems and embedded relations, Galaskiewicz (1985) and Hager et al. (1999) have shown the serious deficiencies local grant economies may develop. The disjointed governance structure of foundations, i.e., their characteristic principal-agent constellation, implies that it is in the interests of both grantor and grantee to be economical with admissions of less-than-desired outcomes. The problem of attribution and ownership leaves open the interpretation of whose “success” or “failure” it ultimately is: the grantor’s or the grantee’s? Dowie (2002), for example, cautions against foundations claiming credit for results mostly due to the grantee.6 A foundation is thus a special power structure tending toward inertia and open to moral hazard in each of the relationships depicted in Figure 1.1. Yet these tendencies are not as stark and direct as they might be in market situations or competitive political systems. They are subtler and on longer time lines. However, it is important to keep in mind that this very structure, based on foundations’ dual independence, is also key to their capacity to take on issues and problems that, for whatever reasons, may be beyond the reach of governments, nonprofits, and businesses: Why should foundations worry about the integration of Islam or the housing conditions of low-income people in Milan? Why should foundations help support Detroit or offer art education in California? The simple answer is because they choose to do so, and they can, and because they can take risks and fail with no terminal consequences. Depending on their deed, they could have done something else but did not chose to do so. This raises the question of legitimacy.7 Of course, in Western countries at least, foundations as institutions are legitimate in the sense that they are the joint expression of a free donor will and the freedom of incorporation and expression. Certainly, they are subject to various sets of regulations and typically benefit from tax deductions. Yet such regulatory oversight is almost exclusively about finance, such as investments, the use of assets, or distribution requirements. They hardly touch on what foundations seek to achieve in terms of purpose, how, and to what effect. As long as foundations stay within the realm of the law, due diligence applies to investments and expenditures but not the choice of priorities or grantees. Foundations’ governance and independence create an organizational form of unparalleled self-sufficiency, shielded from both the outside and inside. While the deed offers input legitimacy at most, its actual instrumentality rarely extends to performance criteria, let alone measures of success and failure. There is, as just mentioned, the basic legitimacy granted on the basis of freedom of association

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and incorporation as specified in the regulatory system, but that too says nothing about the functional or output legitimacy private firms achieve through market performance and public agencies through the ballot box. The governance structure of foundations means that trustees are not owners in the sense of shareholders, and while different parties could assume or usurp the role of principal, such a position would not rest on property rights. Critically, because of the limited application of the basic principal-agent model in non-market situations as in philanthropy, it is likely that information about performance is not as clearly and keenly demanded, required, assembled, and analyzed as in the forprofit and public sectors. In other words, independent, foundations suffer from chronic signal and incentive deficiencies: the benign fallibility syndrome. While the benign fallibility syndrome may well be the reason for greater inertia, a second characteristic of foundations may be the reason for pronounced path dependencies: the presence of a deed that most likely expresses particular values and deep-seated dispositions of the donor to inform and constrain trustees and often provide the foundation’s raison d’être. Values and dispositions are, if anything, organizationally conservative, not in any political sense, but as more or less permanent fixtures or principles. Add to this the way in which foundation boards are frequently recruited through self-selection (Nielsen 1985, 1996). We could expect that the combined force of the benign fallibility syndrome, a confining deed, and board recruitment patterns may account for higher degrees of inertia and path dependency. If, as we argue, foundations are well suited to address complex problems thanks to their form, how can they, given their governance structure, deal with situations that require facing controversy, managing contestation, or accommodating changing performance yardsticks and their shifting interpretations – without falling back to the lowest common denominator or withdrawing altogether? How can they navigate situations full of conf lict, uncertainty, and unanticipated consequences without losing the innovative edge that requires incentives and capacity to be hyper-alert to signals? Put differently, given the benign fallibility syndrome, foundations may at some point drift toward the “comfort zone” of constructed ambiguity and avoiding failure rather than aiming for success. Scoring smaller victories while following greater ambitions allows foundations to maintain their cooperative governance structure with minimal conflict.

Approaching success and failure While we question simplified notions of “success” and “failure” and cast doubt on the reliance of performance measures, we do not suggest that planning for success is unnecessary; nor do we propose that trying to avoid failures through careful measures would be pointless. To the contrary, any plan is better than no plan, as proponents of strategic philanthropy like Brest (2015: 2–4) remind us, and any performance measure is better than none at all, as venture philanthropists emphasize (Letts et al. 1997).

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Fleishman (2007, Chapter 12) is among the very few foundation experts to address foundation failures. Foundations fail, he argues, for a variety of reasons, but the primary cause is usually a single significant flaw in design or implementation (2007: 166). Such flaws, which then become the weakest link leading the overall initiative toward failure, include: lack of a guiding strategy, mismatch between problem and strategy, lack of a credible logic model or theory of change, weak commitment or lack of experience on behalf of grantees, exclusion of relevant stakeholders, and leadership weaknesses or fragmentation. Note that Fleishman’s weakest link approach identifies largely strategic and managerial aspects that lead to failures of specific programs or initiatives. Some crucial mistake happened, which then pulled down the entire effort. By contrast, the notion of the performance enigma advanced in this book goes deeper in the sense that we see it inherent in the foundation form and in particular in its governance structure. It is not the few blatant failures of philanthropic endeavors we are interested in; indeed, they might ultimately distract from the more common tendency toward benign fallibility. The cases in this collection shed light on this more-subtle process or trend. They show that complex relations between processes and outcomes can be full of uncertainties, even surprises. And while it is good for foundations “to keep their eye on the prize” when addressing demanding issues and pursuing ambitious goals, the cases presented here remind us that a modicum of humble modesty may well be called for. As some of the cases in this collection show, in terms of success and failure, the actual ability of foundations to manage the often seemingly unmanageable relation between processes and outcomes turns out to be more important than well thought-out strategic plans and programs. A few examples might be useful. First, consider a foundation dedicated to feeding the homeless in a large city like London or Los Angeles. In this case, success lies in the maximum number of homeless fed, given available resources. Note that success is not about reducing the number of homeless through advocacy for policy changes or empowering the homeless to fend for themselves. It addresses an immediate need. The two main variables to take into account are the size of the homeless population and the amount of available resources. Performance would be judged on efficiency terms, i.e., the unit cost of relief provided, and not effectiveness, i.e., the alleviation of homelessness. Food pantries or humanitarian relief efforts are similar examples to show that in such cases foundations fulfill a role that could be played by any government agency, any nonprofit organization, or any corporate social responsibility department. Now, consider some foundation awarding stipends to talented students from first-generation immigrant families. In this instance, an obvious measure of success would be maximizing the number of such stipends, assuming a fixed expenditure budget over the lifetime of the awards. Yet unlike the case of a foundation feeding the homeless, this case invites different measures of success – for example, that awardees put the stipend to best use by graduating on time and with a grade point average that makes for an easy transition to the job market or that they and

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their families become fully integrated, upwardly mobile citizens. What is more, the foundation could succeed on one measure, such as maximizing the number of awardees, and fail on another if graduation rates are low or graduates find it difficult to enter the job market. There are time lines for outcomes involved that may extend well beyond the grant periods or the program as such. Consider yet another case: a foundation decides to address global climate change and sets out to support energy transition from carbon-based fuels to renewables. Given the very complexity of technical, economic, and political issues involved, the foundation may be able to set either very general goals (e.g., energy transition achieved and negative impact of climate change mitigated) or very specific goals (e.g., stipends to young scientists studying global climate and energy governance). Note that they are on different time lines and are weakly connected. It is conceivable that the foundation can succeed on the specific but fail on the general goal. It is also possible that the impact of global climate change will be mitigated, while the stipend program fails or remains a moderate success. Put differently, the process of goal attainment or more precisely, the management of goal-activity alignments, becomes as important as achieving the goal itself, even if the precise connection cannot be shown in terms of any stricter notions of causality. Thus, for foundations operating in complex environments, simple notions of “success” and “failure” may not be relevant concepts for assessing performance at all; rather, foundations frequently face the challenge of the ambiguity of not knowing which is which or where they are in the process of achieving set goals. This performance ambiguity is born out of the complexity and uncertainty that seems inherent in relation to their chosen roles, e.g., working toward set outcomes; starting rather than completing activities toward a desired goal; or building bridges between otherwise unconnected or distrusting constituencies, creating space for diverse parties to convene or discordant voices to be heard. For example, KBF’s overall concern in the project to train imams was integration of the Muslim population in Belgium and improved social cohesion. It would be difficult to argue that KBF has achieved this goal – or indeed that any one agency could possibly do so – but KBF did succeed in bringing discordant parties together around various tables, and it undoubtedly succeeded in increasing knowledge of the way in which imams are trained and how this compares with training in other faiths. More generally, as Smith (2010) points out, foundations sometimes work on marginal issues in the hope that they can raise the profile of an issue and get it placed on the policy agenda. The immediate task here is agenda setting rather than substantive change – but the problem is that foundations may be unable to control subsequent processes and events that may be largely independent of the foundation’s program, as happened in the case of KBF. Such developments are different from unintended consequences in a narrow sense, as they point to future interactions among seemingly unrelated events. Fleishman (2007: 263) reports such a case – a Ford Foundation program recounted by Barry Gaberman, its long-time senior vice president: in 1960s Indonesia, the

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foundation decided to train high-potential young economists by having them educated in top US economics departments. The goal was to build premier economics departments at Indonesian universities. When Suharto became prime minister in 1965, he hired these young graduates to run ministries and major governmental institutions, and many did not join the respective faculties. Gaberman concluded that if “Ford’s initiative was to build the Indonesian economics departments, it failed. If, however, the goal was to improve economic policy in Indonesia, which was indeed the ultimate but unstated goal, Ford succeeded even better than it had expressly hoped” (Fleishman 2007: 263). Pawson et al. (2011), studying social interventions, describes both their context and the way they relate to existing as well as changing circumstances: interventions are embedded in complex social systems and frequently designed too much in isolation from other current and past projects; they only produce effects through the reasoning and reactions of their recipients; they have long implementation chains and multiple stakeholders. Recipients are many and varied; recipients are rooted in different localities, institutions, cultures, and histories, all of which shape the fortunes of a program. Ultimately, reactions to interventions differ, and outcomes are generally mixed. Programs are implemented among the turbulence of other interventions and changes, as the Ford Foundation example illustrates. The policy agenda is delivered through a multitude of interventions, each one interfering with the reception of another. Programs beg, steal, borrow, and adapt. Practitioners work constantly to improve the delivery of interventions rather than to preserve uniformity to meet evaluation and trial requirements. Programs are the offspring of previous interventions. Social problems are longstanding; interventions evolve to try to combat them. The success of a current scheme depends on its history. Programs change the conditions that make them work in the first place. An intervention’s success is always time limited since alleviating a problem involves changing its concomitant causes (Pawson et al. 2011: 519). Patrizi et al. (2013) make similar points regarding “the mess” of social change and indicate three key weaknesses in most foundation approaches: linearity and certainty bias, the autopilot effect, and indicator blindness. While the first two weaknesses are arguably of some value in downplaying complexity and uncertainty and thus encouraging foundations to take on “impossible” tasks (see Anheier and Leat 2015), the third – indicator blindness – is potentially more damaging. Indicators, according to Patrizi et al., “serve as a symbol of strategy, certainty, and control” (Patrizi et al. 2013: 59). As organizational sociologists suggest, though performance indicators may well depict some measureable aspect of factual organizational behavior or another, they are ultimately sense-making and orienting devices. Such a view is familiar in neo-institutional theory ( Powell and DiMaggio 1991). At the heart of neo-institutionalist thinking lies the belief that the rational actor model of organizations, while a useful heuristic, is nonetheless insufficient in situations where actions are formed and shaped by prevailing social rules, norms,

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and values that are often taken for granted and hence not questioned. Institutions, like philanthropy, are full of such values and norms; they invigorate individual (e.g., trustee) and organizational (the foundation) behaviors but also constrain them; they open up opportunities and also limit the range of available options that are perceived as legitimate. How do these processes play out for foundations, given their special governance structure and great autonomy as institutions? We follow up on this question and its implications in the following chapter.

Notes 1 Following the structural-operational definition introduced by Salamon and Anheier (1992), foundations are formal organizations that are (i) asset-based to a significant extent, (ii) private, (iii) self-governing, (iv) nonprofit distributing, and (v) serving a public purpose and (vi) have the self-understanding of being a philanthropic foundation (Anheier and Daly 2007; Hammack and Anheier 2013). This is an organizational-sociological definition that brings together the main characteristics of the structure and activity of foundations in order to differentiate them from other nonprofit organizations and businesses but also from public and quasi-public agencies (see also Anheier 2014; Anheier and Hammack 2010; Fleishman 2007: 153). Nonprofit organizations differ from a foundation in the sense that no asset base and original deed are required. They are either based on membership, i.e., associations, or some other corporate form such as a limited liability corporation or cooperative. Operating foundations and grant-seeking foundations are closer to the corporate nonprofit form than they are to grantmaking foundations. 2 We use the term benign fallibility instead of “mellow weakness,” which Seibel (1989, 1994, 1996, 1999) introduced to refer to tendencies toward successful failure among nonprofit organizations, as it seems to capture more fully the nature and unintended consequences of foundation governance; see Chapter 2 on the distinction between benign fallibility and permanent failure (Meyer and Zucker 1989). 3 In larger US foundations, examples are the so-called “requests for grant action,” which are the internal proposals submitted for decision-making by the board on whether to fund a grant application and by how much, or the grant completion reports, which summarize grant performance and achievements afterward. 4 Satisficing, a term created by Herbert A. Simon, is a composite word of satisfy and suffice. Widely used in the economics of decision-making, cost-benefit analysis, psychology, and organizational analysis, it describes behaviors under bounded rationality when set goals seem increasingly difficult to obtain but less ambitious goals are. The term satisficing refers to the reaction of decision-makers when optimization and maximization seem either too costly or outright impossible to achieve. 5 At its core, the principal-agent problem is about the relationship between owners or principals seeking guarantees that managers or agents do not engage in self-serving behavior. It also includes shirking, nepotism, misallocation of financial resources, empire building, and extreme risk-aversion or risk-taking, among others. 6 As part of the project Learning from Partners (2012, 2015), the Heidelberg Center for Social Investment surveyed in total over 5,000 grantees and grant applicants. The project was based on the US-American Grantee Perception Report by the Center for Effective Philanthropy. While the surveys covered the satisfaction of those polled with the foundations’ administrative processes, capacity building, transparency, and feedback policies, they did not address the problem of ownership or results. Instead, in effect, it focused on “customer satisfaction.” 7 Indeed, politically, the question of legitimacy has been debated since the Enlightenment, when the modern foundation form began to emerge (see Prewitt et al. 2006; Clark 1964; Baker 1987).

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References Anheier, H. K. (2014). Nonprofit Organizations: Theory, Management, Policy (2 revised ed.). Abingdon, Oxon: Taylor & Francis Ltd. Anheier, H. K. (Ed.). (2018). Philanthropic Foundations in Comparative Perspectives: Assessments from Twelve Countries, Special Issue: American Behavioral Scientist (forthcoming). Anheier, H. K., & Daly, S. (Eds.). (2007). The Politics of Foundations: A Comparative Analysis. London, UK; New York, NY: Routledge. Anheier, H. K., Förster, S., Mangold, J., & Striebing, C. (2017). Stiftungen in Deutschland 1: Eine Verortung. Wiesbaden: Springer VS. Anheier, H. K., & Hammack, D. C. (Eds.). (2010). American Foundations: Roles and Contributions. Washington, DC: Brookings Institution Press. Anheier, H. K., & Leat, D. (2006). Creative Philanthropy: Toward a New Philanthropy for the Twenty-First Century. Oxon; New York, NY: Routledge. Anheier, H. K., & Leat, D. (2015, April 27). Response to ‘Strategic Philanthropy and Its Discontents’. Retrieved from https://ssir.org/up_for_debate/strategic_philanthropy_ and_its_discontents/anheier_leat Augsburger, R. R., Chang, V., & Meehan, W. F., III. (2007). The San Francisco Foundation: The Dilemma of the Buck Trust. Harvard Business Review. Retrieved from https:// cb.hbsp.harvard.edu/cbmp/product/SI106A-PDF-ENG Australian Public Service Commission. (2007, May 31). Tackling Wicked Problems: A Public Policy Perspective. Retrieved 15 November 2017, from www.apsc.gov.au/ publications-and-media/archive/publications-archive/tackling-wicked-problems Baker, K. M. (Ed.). (1987). The French Revolution and the Creation of Modern Political Culture: The Political Culture of the Old Regime (Vol. 1). Oxford; New York, NY: Pergamon. Berridge, G., & James, A. (2003). A Dictionary of Diplomacy (2nd ed.). Houndmills, Basingstoke, Hampshire; New York, NY: Palgrave Macmillan. Boesso, G., Kumar, K., & Michelon, G. (2013). Descriptive, Instrumental and Strategic Approaches to Corporate Social Responsibility: Do They Drive the Financial Performance of Companies Differently? Accounting, Auditing & Accountability Journal, 26 (3), 399–422. https://doi.org/10.1108/09513571311311874 Boris, E. T., & Steuerle, C. E. (Eds.). (2006). Nonprofits & Government: Collaboration & Conflict. Washington, DC: Urban Institute Press. Boris, E. T., & Winkler, M. (2013). The Emergence of Performance Measurement as a Complement to Evaluation among U.S. Foundations. New Directions for Evaluation, 2013(137), 69–80. https://doi.org/10.1002/ev.20047 Brest, P. (2012). A Decade of Outcome-Oriented Philanthropy. Retrieved 24 November 2017, from https://ssir.org/articles/entry/a_decade_of_outcome_oriented_philanthropy Brest, P. (2015, April 27). Strategic Philanthropy and Its Discontents. Retrieved 24 November 2017, from https://ssir.org/articles/entry/strategic_philanthropy_and_its_discontents Bugg-Levine, A., & Emerson, J. (2011). Impact Investing: Transforming How We Make Money While Making a Difference (1st ed.). San Francisco, CA: Jossey-Bass. Bundesverband Deutscher Stiftungen. (2017). Expertenkreis Impact Investing. Retrieved 24 November 2017, from www.stiftungen.org/verband/was-wir-tun/vernetzungsange bote/arbeitskreise-foren-und-expertenkreise/expertenkreis-impact-investing.html Cabinet Office. (2014a). How Foundations Are Using Total Impact Approaches to Achieve Their Charitable Missions. London. Retrieved from www.gov.uk/government/uploads/ system/uploads/attachment_data/file/386335/2903051_ImpactFoundations_acc.pdf Cabinet Office. (2014b). Total Impact Tool. London. Retrieved from www.gov.uk/government/ uploads/system/uploads/attachment_data/file/385846/Q_A_Total_Impact_calculator.

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pdfCarman, J. G. (2009). Nonprofits, Funders, and Evaluation: Accountability in Action. The American Review of Public Administration, 39 (4), 374–390. https://doi.org/10.1177/ 0275074008320190 Centrum für Soziale Investitionen und Innovationen (CSI). (2012). Learning from Partners: Gesamtreport 2012. Heidelberg: Ruprecht-Karls-Universität Heidelberg. Retrieved from www.stiftung-mercator.de/de/publikation/learning-from-partners-gesamtreport-2012/ Centrum für Soziale Investitionen und Innovationen (CSI). (2015). Learning from Partners: Gesamtreport 2015. Heidelberg: Ruprecht-Karls-Universität Heidelberg. Retrieved from www.stiftung-mercator.de/de/publikation/learning-from-partners-gesamtreport-2015/ Churchman, C. W. (1967). Guest Editorial: Wicked Problems. Management Science, 14 (4), B141–B142. Clarke, J. A. (1964). Turgot’s Critique of Perpetual Endowments. French Historical Studies, 3(4), 495–506. https://doi.org/10.2307/286153 Collins, J. C. (2001). Good to Great: Why Some Companies Make the Leap . . . and Others Don’t. New York, NY: HarperBusiness. Collins, J. C. (2005). Good to Great and the Social Sectors: A Monograph to Accompany Good to Great: Why Some Companies Make the Leap . . . and Others Don’t. New York, NY: HarperBusiness. Dahler-Larsen, P. (2013). The Evaluation Society. Stanford, CA: Stanford University Press. Derlien, H.-U., & Rist, R. C. (2002). Policy Evaluation in International Comparison. In J.-E. Furubo, R. C. Rist, & R. Sandahl (Eds.), International Atlas of Evaluation (pp. 439– 455). New Brunswick, NJ; London, UK: Transaction Publishers. DiMaggio, P. (Ed.). (1986). Nonprofit Enterprise in the Arts: Studies in Mission and Constraint. New York, NY: Oxford University Press. Dowie, M. (2002). American Foundations: An Investigative History (reprint ed.). Cambridge, MA: The MIT Press. Eckhardt, B., Jakob, D., & von Schnurbein, G. (2016). Swiss Foundation Report 2016 (CEPS Forschung und Praxis No. 15). Basel: Center for Philanthropy Studies (CEPS). Ferlie, E. (Ed.). (1996). The New Public Management in Action. Oxford; New York, NY: Oxford University Press. Ferlie, E., Fitzgerald, L., McGivern, G., Dopson, S., & Bennett, C. (1996). Making Wicked Problems Governable?: The Case of Managed Networks in Health Care. Oxford; New York, NY: Oxford University Press. Ferriby, R. D. (2016, April 25). Saving a City in Crisis. The Washington Monthly. Retrieved from https://philanthropy.washingtonmonthly.com/portfolio_page/saving-a-city-in-crisis/ Fleishman, J. L. (2007). The Foundation: A Great American Secret: How Private Wealth Is Changing the World (1st ed.). New York, NY: Public Affairs. Ford Foundation. (2017). A Legacy of Social Justice. Retrieved 24 November 2017, from www.fordfoundation.org/about-us/a-legacy-of-social-justice/ Frumkin, P. (2006). Sustaining Nonprofit Performance. Journal of Policy Analysis and Management, 25(2), 491–493. https://doi.org/10.1002/pam.20183 Galaskiewicz, J. (1985). Social Organization of an Urban Grants Economy: A Study of Business Philanthropy and Nonprofit Organizations. Orlando, FL: Academic Press. Gary, S. N. (2010). The Problems with Donor Intent: Interpretation, Enforcement, and Doing the Right Thing. Chicago-Kent Law Review, 85(3), 977–1043. Grønbjerg, K. A., Martell, L., & Paarlberg, L. (2000). Philanthropic Funding of Human Services: Solving Ambiguity through the Two-Stage Competitive Process. Nonprofit and Voluntary Sector Quarterly, 29(1 suppl.), 9–40. https://doi.org/10.1177/0899764000291S002 Haden, J. (2015, March 15). 7 Inspiring Steve Jobs Quotes That Just Might Change Your Life. Retrieved 15 November 2017, from www.inc.com/jeff-haden/7-inspirational-stevejobs-quotes-that-will-change-your-life.html

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Hager, M., Galaskiewicz, J., Bielefeld, W., & Pins, J. (1999). Tales from the Grave: Organizations’ Accounts of Their Own Demise. In H. K. Anheier (Ed.), When Things Go Wrong: Organizational Failures and Breakdowns (pp. 51–70). Thousand Oaks, CA: Sage Publications. Hammack, D. C., & Anheier, H. K. (2013). A Versatile American Institution: The Changing Ideals and Realities of Philanthropic Foundations (1st ed.). Washington, DC: Brookings Institution Press. Harrow, J., & Jung, T. (2011). Philanthropy is Dead: Long Live Philanthropy? Public Management Review, 13(8), 1047–1056. https://doi.org/10.1080/14719037.2011.619062 Hood, C. (1991). A Public Management for All Seasons? Public Administration, 69 (1), 3–19. https://doi.org/10.1111/j.1467-9299.1991.tb00779.x Kennedy, R. (2014, November 7). ‘Grand Bargain’ Saves the Detroit Institute of Arts. The New York Times. Retrieved from www.nytimes.com/2014/11/08/arts/design/grand-bargainsaves-the-detroit-institute-of-arts.html Kennedy, R., Davey, M., & Yaccino, S. (2014, January 13). Foundations Aim to Save Pensions in Detroit Crisis. The New York Times. Retrieved from www.nytimes.com/2014/01/14/ us/300-million-pledged-to-save-detroits-art-collection.html Kramer, M. R., Graves, R. W., Hirschhorn, J., & Fiske, L. (2007, April 1). From Insight to Action: New Directions in Foundation Evaluation. Retrieved 24 November 2017, from www.fsg.org/publications/insight-action Lavizzo-Mourey, R. (2012, April 1). 2012 President’s Message: The Push for the Summit. Retrieved 15 November 2017, from www.rwjf.org/en/library/annual-reports/thepush-for-the-summit.html Leat, D. (2012). Government, Foundations and Big Society: Will You Be My Friend? In A. Ishkanian & S. Sretzer (Eds.), The Big Society Debate (pp. 128–138). Cheltenham, UK: Edward Elgar. Leat, D. (2016). Philanthropic Foundations, Public Good and Public Policy. London, UK: Palgrave Macmillan. Letts, C. W., Ryan, W. P., & Grossman, A. S. (1997, March 1). Virtuous Capital: What Foundations Can Learn from Venture Capitalists. Retrieved 24 November 2017, from https:// hbr.org/1997/03/virtuous-capital-what-foundations-can-learn-from-venture-capitalists McLain, D. L., Kefallonitis, E., & Armani, K. (2015). Ambiguity Tolerance in Organizations: Definitional Clarification and Perspectives on Future Research. Frontiers in Psychology, 6. https://doi.org/10.3389/fpsyg.2015.00344 Meyer, J. W., & Rowan, B. (1977). Institutionalized Organizations: Formal Structure as Myth and Ceremony. American Journal of Sociology, 83(2), 340–363. Meyer, M. W., & Zucker, L. G. (1989). Permanently Failing Organizations. Newbury Park, CA: Sage Publications. Nielsen, W. A. (1985). The Golden Donors: A New Anatomy of the Great Foundations (1st ed.). New York, NY: Truman Talley Books; E. P. Dutton. Nielsen, W. A. (1996). Inside American Philanthropy: The Dramas of Donorship (Complete Numbers Starting with 1, 1st ed.). Norman, OK: University of Oklahoma Press. Ostrander, S. A., & Schervish, P. G. (1990). Giving and Getting: Philanthropy as Social Relation. In J. Van Til (Ed.), Critical Issues in American Philanthropy (pp. 67–98). San Francisco, CA: Jossey-Bass. Ostrower, F. (2004). Attitudes and Practices Concerning Effective Philanthropy. Washington, DC: The Urban Institute, Center on Nonprofits and Philanthropy. Patrizi, P., Heid Thompson, E., Coffman, J., & Beer, T. (2013). Eyes Wide Open: Learning as Strategy under Conditions of Complexity and Uncertainty. The Foundation Review, 5(3), 50–65.

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Pawson, R., Wong, G., & Owen, L. (2011). Known Knowns, Known Unknowns, Unknown Unknowns: The Predicament of Evidence-Based Policy. American Journal of Evaluation, 32 (4), 518–546. https://doi.org/10.1177/1098214011403831 Pharoah, C., Walker, C., & Goddard, K. (2017). Giving Trends 2017. London, UK: Association of Charitable Foundations. Retrieved from www.acf.org.uk/downloads/publications/ ACF135_Foundation_Giving_Trends_2017_SP_FINAL.pdf Plummer, M., & Forti, M. (2013, February 19). How Leading Philanthropists Fail Well. Retrieved 15 November 2017, from https://ssir.org/articles/entry/how_leading_philanthropists_ fail_well Porter, M. E., & Kramer, M. R. (1999, November 1). Philanthropy’s New Agenda: Creating Value. Retrieved 24 November 2017, from https://hbr.org/1999/11/philanthropysnew-agenda-creating-value Powell, W. W., & DiMaggio, P. J. (Eds.). (1991). The New Institutionalism in Organizational Analysis (1st ed.). Chicago, IL: University of Chicago Press. Power, M. (1994). The Audit Explosion. London, UK: Demos. Power, M. (2009). The Risk Management of Nothing. Accounting, Organizations and Society, 34 (6), 849–855. https://doi.org/10.1016/j.aos.2009.06.001 Prewitt, K. (1999). Foundations as Mirrors of Public Culture. American Behavioral Scientist, 42 (6), 977–986. https://doi.org/10.1177/00027649921954697 Prewitt, K., Dogan, M., Heydemann, S., & Toepler, S. (Eds.). (2006). The Legitimacy of Philanthropic Foundations: United States and European Perspectives. New York, NY: R. Sage Foundation. Reichard, C. (2001). New Approaches to Public Management. In K. König & H. Siedentopf (Eds.), Public Administration in Germany (1. Aufl., pp. 541–556). Baden-Baden: Nomos. Salamon, L. M., & Anheier, H. K. (1992). Toward an Understanding of the International Nonprofit Sector: The Johns Hopkins Comparative Nonprofit Sector Project. Nonprofit Management and Leadership, 2 (3), 311–324. https://doi.org/10.1002/nml.4130020310 Seibel, W. (1989). The Function of Mellow Weakness: Nonprofit Organizations as Problem Nonsolvers in Germany. In The Nonprofit Sector in International Perspective (pp. 177–192). New York, NY; Oxford: Oxford University Press. Seibel, W. (1994). Funktionaler Dilettantismus: erfolgreich scheiternde Organisationen im ‘Dritten Sektor’ zwischen Markt und Staat. Baden-Baden: Nomos. Seibel, W. (1996). Successful Failure: An Alternative View on Organizational Coping. American Behavioral Scientist, 39(8), 1011–1024. Seibel, W. (1999). Successful Failure: An Alternative View of Organizational Coping. In H. K. Anheier (Ed.), When Things Go Wrong: Organizational Failures and Breakdowns (pp. 91–104). Thousand Oaks, CA: Sage Publications. https://doi.org/10.4135/9781452231457 Simon, H. (1979). Rational Decision Making in Business Organizations. American Economic Review, 69(4), 493–513. Simon, J. G., Dale, H., & Chisolm, L. B. (2006). The Tax Treatment of Nonprofit Organizations: A Review of Federal and State Policies. In W. W. Powell & R. Steinberg (Eds.), The Nonprofit Sector: A Research Handbook (2nd ed., pp. 267–306). New Haven, CT: Yale University Press. Skloot, E. (2001, October). Slot Machines, Boat-Building and the Future of Philanthropy, Inaugural Address to the Waldemar A. Nielsen Issue in Philanthropy Series. Washington, DC: George Washington University. Smith, S. R. (2010). Foundations and Public Policy. In H. K. Anheier & D. C. Hammack (Eds.), American Foundations: Roles and Contributions (pp. 371–387). Washington, DC: Brookings Institution Press.

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2 TAKING A CLOSER LOOK Fallibility and ambiguity in philanthropy

In the previous chapter, we looked at what is special about foundations: their unparalleled autonomy and the concomitant benign fallibility syndrome. Autonomy allows them to address complex problems, to deal with controversy and contestations, to accommodate changing performance yardsticks and shifting interpretations, and to navigate situations full of conflict, uncertainty, and unanticipated consequences – and to do all this without losing their potential innovative edge. The benign fallibility syndrome lessens the capacity of foundations to realize their potential and leads to the performance enigma – a topic for further elaboration in this chapter. We will explore what this particular combination of potential and constraint may mean for the success and failure of foundation activities.

Digression toward the mean? Among the cases presented in this book, there are few, if any, examples of unequivocal “success” or resounding “failure.” In fact, in preparatory research, we approached about 70 foundation experts to identify cases of clear successes and failures. The idea was to establish a long list from which the most instructive ones could be selected in order to identify factors leading to either outcome and very much in the context of the kinds of causes Fleishman (2007) had in mind when he wrote about failures. We asked, Rather than impose our own definition of effective and ineffective, or successful and unsuccessful foundations, we are asking selected foundation experts to think about foundations that they regard as exemplars of higher and lower performance in their field of expertise. Specifically, we are interested in examples of foundations where things have gone wrong or impressively succeeded in any of the following areas: grant making practices;

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relationships with the grantees; accountability and transparency; program or project achievements; board/management relations; relationships with regulators and oversight agencies; investments and financial management; public relations perceptions of the foundation. In response, we received many suggestions, some 60 in total from nine countries. However, and somewhat to our surprise, very few clear successes and hardly any clear failures were proposed. Instead, we received mostly qualified suggestions that seemed arranged along an imaginary continuum, as suggested in Figure 2.1. This resulting pattern suggested something like a digression toward the mean of being mostly more or less successful and, somewhat less frequently, unsuccessful. As Fleishman remarked with “foundations making thousands of grants every year, it would be surprising if some of those grants didn’t work out as well as their grantmakers had hoped” (2007: 261). However, the responses we received contrasted with the certainty projected by the list of 100 success cases identified by Fleishman et al. (2007) or the list Wooster (2006) compiled on foundations’ greatest mistakes.1 Instead, we arrived at a collection of foundation interventions in which ambiguity about the outcome in terms of success and failure became the recurring theme. Could it be that the benign fallibility syndrome drives foundations away from clear successes and prevents them from either producing or admitting failures, resulting in the “more or less” pattern observed and illustrated in Figure 2.1? Fleishman argues that “if a foundation doesn’t experience some failures in its grantmaking, a persuasive case can be made that it is either not tackling sufficiently challenging problems or not taking high risk solutions to solve them” (2007: 261–262). In contrast, we propose that especially when taking on challenging problems and high-risk solutions, foundations become satisficing organizations in tendency and engage in constructive ambiguity. We suggest that this explanation fits the response pattern we received more closely than the avoidance behavior Fleishman sees behind a lack of failed grantmaking. Could it be that the world of philanthropy offers an ideal setting for what Meyer and Zucker (1989) diagnosed as permanent failure and Seibel (1996) saw as indicative for nonprofit organizations generally? According to Meyer and Zucker (1989), permanently failing organizations can emerge when three factors

Success

FIGURE 2.1

more or less successful

Success and failure continuum

more or less failed

Failure

Taking a closer look

29

are present. First, the interest in actual performance diverges from the interest in continued maintenance, and second, it is attached to separate status groups, such as owners, management, and employees; third, the maintenance group wields sufficient power to overrule both performance interests and exit options. As a result, low-performing firms continue to exist. Meyer and Zucker (1989) associated the phenomenon with periods of organizational decline and deterioration when firms experience prolonged periods of stalemate among stakeholders that on the surface project the deceptive air of stability. In such situations, which indeed may go unnoticed for some time, excessive inertia can build up, which makes change increasingly difficult. With stakeholders unresponsive, unwilling to take risks, in denial, or hyper-active by engaging in frequent re-organizations, the firm – or a foundation – may simply linger on (Rouleau et al. 2008). Unlike businesses, foundation can afford permanent failure and for longer periods of time. However, Meyer and Zucker (1989) and Seibel (1999) point out that particular kinds of nonprofit organizations, public and quasi-government agencies, or employeeowned firms can also remain in a state of prolonged under-performance. In endowed foundations, there are structural tendencies toward information asymmetries between principals and agents, recalling the special configuration outlined in Chapter 1 and associated signal problems. Their governance structure shields foundations from outside signals and may well moderate internal information flows and incentives as well. On the one hand, and crucially, unlike business firms and most nonprofits, foundations have no need to care about failure – the resources in terms of time and finance are already committed, and the foundations can only “die” by making poor investment decisions – and not through bad performance in furtherance of their deed or charter. “Success” and “failure” may be nice to know, but there is no ultimate need to know tied to organizational survival or indeed personal tenure and advancement. If, on the other hand, a foundation seeks to attack a complex problem, it relies for its success on the very signals and incentives it can comfortably choose to receive – or ignore – selectively. Yet, as mentioned in Chapter 1, in recent years, the world of foundations has undergone a profound change in how it thinks about performance; professionalization and the culture of measurement mean that the intention of doing “good” is no longer good enough ( Collins 2001, 2005). Demonstrable benefit is expected, and questions are being asked. In the past, foundation boards could rely on a repertoire of answers to those who challenged any gap between their aspiration and performance, very much in terms of the sense-making and framing accounts sociologists speak of. Specifically, •

•

It was pump priming, intended to start rather than complete something – e.g., a foundation might give a smallish grant in order to get a project up and running and able to approach other funders. The foundation’s goal was to explore, so “success” and “failure” are not relevant concepts – e.g., a foundation might give a social enterprise a grant to employ a consultant to explore the potential for issuing social impact bonds.

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•

It was innovative so there was no expectation of success – e.g., a foundation might give a grant to an organization adopting a highly innovative, untried mobile phone app for partially sighted people. The purpose of the grant is to identify those elements that do not work for this group. It was a complex issue in which both government and market had failed, so “success” was likely to be slow and partial – e.g., support for a small organization working with homeless, unemployed, drug-dependent young people with mental health issues. It is too soon to tell – e.g., two years into a program providing scholarships to young immigrants is too soon to judge whether the program will have any lasting impact on the recipients’ employment prospects. The grantee failed, not the foundation – e.g., the project was well designed and the foundation grant was sufficient to cover all costs but the person appointed to run it failed to generate the team spirit and confidence essential to successful implementation. The environment changed and government moved the goalposts – e.g., a program to support summer play schemes was going well until government withdrew matching funding and started charging for use of school facilities. The foundation may not have achieved what it hoped to, but at least it stopped the problem getting any worse – e.g., a program to encourage use of non-custodial sentences for women convicted of minor crimes was reducing the number of women in prison until a new government was elected with a hard-line policy on custody. Numbers of women sent to prison started increasing again but did not reach the level that had obtained prior to introduction of the program.

•

•

•

•

•

Are these accounts of suboptimal performance just anecdotal, or are they expressions of endemic problems, as the overall argument we explore in this book suggests? To address this question, we first examine a number of issues related to foundation performance in order to advance our argument that ambiguity is endemic in foundation work and is a combined consequence of form advantages, on the one hand, and weaknesses, on the other.

Attribution, assessment criteria, and timing Success and failure are relative notions, or, as Fleishman (2007) puts it, failure is a squishy concept. Coming second in a race is to fail to win, but it is more successful than coming tenth. At what point does not failing count as success and not succeeding mean failing? We suggest that any such hypothetical cut-off point would be the result of a social accounting process of sense-making. In complex problem situations, trustees and staff would seek ways to make sure the project results are “good enough” in the sense of satisficing. The governance structure of foundations allows them great leeway in claiming successes and in not advertising failures. Some of the ambiguity responsible for the performance enigma is related to the question of who actually succeeds and who fails. The governance structure

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of foundations makes it difficult to identify who or what is being assessed. Are we judging the success or failure of a program or the success or failure of a specific grant, that of the grantee organization or of the foundation itself? Fleishman (2007), for instance, writes in Chapter 12 about how foundations fail – but arguably it is grantees not foundations that fail. Foundations may fail in meeting their goals and ambitions, but they will not fail in a way that threatens their survival as an organization. What is more, when foundations talk about assessing performance, it is most often the performance of the grantee that they focus on and not their own performance, whether board or management. Assessing the performance of foundations has to be viewed in light of the governance structure or principal-agent constellation in Figure 1.1. So, if foundations measure their performance through the activities of grantees, they do so indirectly at best and certainly not in a way that makes it problematic to attribute foundation activities to program results. Indeed, attribution is one of the most difficult methodological challenges in assessing foundation performance. It emerged, for example, as a major issue in the case of RWJF’s program to reduce tobacco use. Were smoking rates not already beginning to decline, and did other factors contribute to the drop? More generally, what, if anything, can be traced back to the foundation’s intervention? What difference did the JRCT’s support really make to the passage of the Freedom of Information Act in the UK? Would the act have been passed without the support of the trust? Rather than claiming that a result can be attributed to the foundation’s intervention, some foundations prefer to talk in terms of “contribution,” thus implicitly recognizing that any impact or change is very likely to be the result of a combination of complex, interacting factors. Our cases reveal considerable variety in how directly foundations were involved in achieving outcomes “on the ground.” The Freudenberg Foundation’s promotion of service learning in schools and colleges ( Seifert and Zentner 2010), and the Foundation anstiftung & ertomis’s (Krüger 2011) involvement in community gardening as a means of encouraging social integration are both examples of foundations playing a primarily supportive role – the foundation supports others to get something done. In other cases, for example, KBF and the training of imams, Cariplo and social housing, Eberhard von Kuenheim Foundation and Theresienthal – the foundation is directly involved, takes the initiative, and steers the project by providing much more than financial support alone. The more a foundation is involved in only indirect ways, clearly, the more difficult direct attribution becomes. Furthermore, and fundamentally, “success” and “failure” ultimately involve value judgments. For example, as the Walton Family Foundation case illustrates (see Chapter 3), foundations have been successful in encouraging the spread of charter schools in the US. However, in doing so, they failed to improve the educational chances of the majority of children in the US. The value judgment is do we seek to improve the chances of many students or of a few? The RWJF may have encouraged a reduction in smoking in the US ( Grob 2011) but may also have

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indirectly contributed to an increase in tobacco use in Africa and Asia.2 Again, there is a value judgment: do we seek to reduce smoking incidence in the US even if it means that tobacco companies seek to open markets overseas? Efforts to save the glass manufacturing skills in the small Bavarian town of Theresienthal may have been a good cause, but was it worthwhile considering the relatively small number of jobs saved at relatively high cost and at a time of high unemployment (von Schnurbein 2011)? Given the many problems faced by educational institutions in the 1990s, was Freudenberg’s project to introduce service learning really a priority ( Seifert and Zentner 2010)? Thus, success and failure soon become value-laden concepts, and definitions are further complicated when projects and outcomes are complex and may lead to unanticipated consequences, as we will argue. A project designed to achieve some goal may fail to meet its target but succeed in achieving something else, or come close to its intended goals in roundabout ways, as the example of the Ford Foundation’s Indonesia program illustrates (see Chapter 1; Fleishman 2007). It may also have unintended consequences as some of the cases presented in the next chapter reveal: for example, the Compagnia di San Paolo’s social microcredit program treated recipients of its housing programs as creditors, which is culturally seen negatively in Italy (Bolognesi and Palenzona 2011). Other cases reveal the shifting normative bases of foundation activities and unanticipated degrees of politicization over time: the internationally acknowledged success of the Central European University as an independent academic institution of excellence in the region became a thorn in the side of the increasingly illiberal Orban regime during the 2010s. Funded by financier and philanthropist George Soros and his Open Society Fund, the university was ultimately threatened by Orban with closure in 2016. Orban, himself once a grantee of the Open Society Fund and for ulterior reasons, used a respected and prestigious institution as an example of alleged outside interference in Hungary’s internal affairs (Ignatieff 2017; Charter 2018; Frum 2017). The quality of the evidence is also important. Robust, thorough documentation may present a very different and less flattering picture of a program as compared with superficial progress reviews. Data from the Casey Foundation Jobs Initiative illustrate the problem of choosing such high-quality measures leading to effective programs looking worse than other programs that are not so measured ( Giloth and Gewirtz 2009). In other words, “good” measurement can minimize results relative to projects whose results are “loosely” measured. Similarly, the foundation funded Fryhuset Easy Street initiative in Stockholm, Sweden, claimed that one result was an 80 percent reduction in subway vandalism and crime, which pleased the funder and encouraged declarations of success. Yet subsequent research revealed that subway crime had been dropping overall, including at stations that were not part of the Fryhuset Easy Street initiative (Roth 2004). The varying quality of evidence allows for constructive ambiguity in framing foundation performance, as does the timing of any assessment, and, indeed, the ending of a project. A project may show no results after one year or excellent

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results after three years, but those results may dissipate after five years. Social change tends to involve long implementation chains, which are also often not neatly sequential. So, for example, whether JRCT’s work on freedom of information in the UK is seen as a success or not depends to a degree on when that judgment is made. For long periods, the program appeared to achieve very little; later on, some gains were made, and later still, it could be argued that some of those gains have been lost (List 2011; Davies 2004, see Chapter 3). When to end a program or grant is often a difficult judgment for foundations. If a program is nearing its allocated end date but has achieved little, is it best to pull out immediately, thus “losing” the whole investment, or carry on until some results are apparent? When a program is going well and appears to be having an effect, how does the foundation judge when marginal returns will begin to diminish? For example, a program may have increased the reading age of 80% of a class of disadvantaged children at an average cost of $50 per child, but the cost of increasing the reading age of the remaining 20% is likely to be significantly higher. The exit strategies and behaviors of foundations are not a one-sided matter and involve some coordination between trustees, as well as grantees, in the first place. Such processes are subject to the same constructed ambiguity that are the outcome of framing and sense-making. Given the frequent “more-or-less” results pattern suggested by Figure 2.1, foundations are likely to settle for a positive spin in view of its resources relative to other opportunities or, in the case of less successful projects, look for a way out without harming their reputation. The constructed result is likely a scenario of “mission accomplished” given the complexity of the problems both foundation and grantees attempted to tackle.3

Complexity and dynamism If foundations address complex problems, even wicked ones, they typically operate in task environments that are unstable and unpredictable, as, for example, KBF did when it embarked on the imam project or the Walton Family Foundation’s charter school projects (Leat 2007, see Chapter 3). Others appear less demanding: the Kuenheim Foundation found a relatively stable and predictable task environment that became more complex over time (von Schnurbein 2011, see Chapter 3). For performance, context, i.e., the wider organizational and political environment, clearly matters. In this respect, organizational theory proposes two dimensions: complexity and dynamism (see Perrow 1986). Combining both leads to four uncertainty scenarios, presented in Table 2.1. Complexity refers both to the number of elements in the organizational task environment and to their heterogeneity in terms of demands and expectations. If a foundation has few task elements and all are fairly similar, such a homogeneous task environment would be less complex than a situation with a variety of elements. Dynamism refers to the rate and predictability of change, both internally among these elements and from outside. If they change rarely or slowly and are

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TABLE 2.1 Foundation task environments and performance

High Dynamism

Low Dynamism

High Complexity

Low Complexity

High uncertainty

Medium uncertainty

Unclear performance measures; high ambiguity in success/failure

Some ambiguity in success/failure based on dynamism

e.g., a foundation seeking to change policies on homelessness and housing

e.g., a foundation seeking to feed and house the homeless as public budgets are cut or governments relinquish responsibility

Medium uncertainty

Low uncertainty

Some ambiguity in success/ failure based on complexity

Standard performance measures; clear patterns of success and failure

e.g., a foundation reintegrating homeless into society, making them self-sufficient

e.g., a foundation feeding the homeless or providing shelter

relatively predictable, then the task environment is stable; however, if they change often, fast, and in unpredictable ways, then the task environment is unstable or volatile. Any ambiguity of performance will be more pronounced when complexity and dynamism are high and vice versa – they will be lowest in cases of lowcomplexity, stable situations and in between when complexity or dynamism are present. The lesson of Table 2.1 is that each of the four scenarios requires not only different performance measures and metrics but also approaches. For low-uncertainty environments, many performance measures for inputs, throughputs, and outputs are available and clearly applicable. For example, a program to improve the reading proficiency of a class of disadvantaged children might measure, at the start of the intervention, the additional support provided to each child and the child’s reading proficiency six months later. Such environments characterized by stability and predictability are also the preferred terrain of bureaucratic organizations. Such environments are the true locus of standard performance metrics and logical frameworks. Performance measures are more difficult to establish and interpret and hence are likely to be contentious when either high degrees of complexity or dynamism are present. Programs working with young delinquents frequently have to grapple with a high degree of complexity in the form of multiple agencies and stakeholders: health, housing, criminal justice, employment, and so on, each with their own targets, expectations, and constraints. The Kuenheim Foundation had to find a way to reconcile market forces with skill and jobs preservation and could approach this complex task in a relatively stable environment (von Schnurbein 2011, see Chapter 3). We do not argue that performance measures are always

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inapplicable under such scenarios; rather we caution that they are likely subject to some degree of sense-making accounts and constructive ambiguity. The challenge to gauge success and failure is greatest when complexity and dynamism coincide. When this is the case, foundations can best deploy their comparative advantages, but that is also when performance and outcome measurements are most daunting, as we will see in the next chapter when we examine the Walton Family Foundation’s charter school project. Another example is the Stavros Niarchos Foundation Cultural Center in Athens: the foundation was looking for a project that would demonstrate its values and commitment to the Greek nation. The initial idea was to provide a new home for the National Library of Greece. This then developed into a plan for the creation of a huge new cultural center, which would combine the library, the Greek National Opera, and a much-needed open-air public space in Athens. The project was to be a public-private partnership between the foundation and the Greek government. The foundation would pay all of the costs associated with construction and then hand the center over to the Greek government for managing ongoing operations. This involved discussions with a wide range of stakeholders and ministries – education, environment, culture, finance, and so on, each with their own expectations and constraints. Just as the plan for the project was finalized in the late 2000s, the political environment changed dramatically with the realization of the scale of the economic crisis in Greece. This raised questions not only about the sustainability of the project but also about its relevance: should the foundation be spending millions on books and opera when people were going hungry? The foundation decided to go ahead in order to restore hope and pride in Greece. Whether the center will be sustainable in the longer-term is unknown as yet (Leat 2016).

Multiple goals, competing goals Especially in environments that are complex and dynamic, setting single goals can be challenging. In most cases, there are multiple goals, even goal hierarchies, and goals vary not only in scale and scope but also in difficulty of achieving them. Some foundations approach this challenge through extensive planning exercises like goal-oriented project plans or logical framework analysis. The purpose is to arrive at a systematic and comprehensive plan for steps needed to achieve a set of goals and the relationships among them, including the identification of problems or “critical paths” in the flow of activities along a projected time line. As Table 2.1 suggests, some goals pursued by foundations are relatively simple and static when they are located in stable, “simple”/low-complexity environments; others are complex and constantly evolving. So, a foundation may appear highly successful at addressing simple, stable issues as compared with another foundation that works on more complex, fast-changing issues. For example, the Calouste Gulbenkian program on immigrant doctors had a specific, contained focus in which the problem and the solution were relatively clear ( Campos Franco 2011).

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By contrast, the Pew program on global warming had none of these advantages (Kohler 2007). Working on a complex, dynamic issue further complicates any assessment of “success” and “failure” because the issue itself changes scope, shape, and direction. The KBF program on Muslim education and integration could be seen as a failure in the light of subsequent events in Belgium, but arguably this has more to do with the rapidly changing nature of the problem rather than the success or failure of the program per se. The same might also be said of Barrow Cadbury Trust’s work creating and supporting the Migrant Rights Network (MRN) (Thümler 2011), bringing together various organizations working in the field in order to share knowledge, reduce duplication, and strengthen the collective voice. MRN was designed to serve as a forceful campaigning tool to address policy issues, support informed legislation and enable migrants to have a leadership role in this process. It also aimed to influence public opinion by creating a more informed and positive narrative. But again, the rapidly changing scale, scope, and political salience of migrant rights has hindered the network’s achievements; what we cannot judge is what the situation would have been without the network. Goals can also compete with each other as programs evolve, and the best designed logical frameworks or log frames become seemingly obsolete as conditions change. Someone’s problems can become someone else’s solution and vice versa. Organization theory has pointed out that in complex task environments, conflicts over means and goals characterize the behavior of many actors. Program managers or trustees may find it difficult to separate their own interests from those of the organization and therefore pursue self-interested strategies, either for themselves personally or in relation to the particular unit or segment for which they are responsible. This is reminiscent of principal-agent problems discussed in the previous chapter and can easily produce situations where goals compete with each other. March and Olsen (1979) describe such situations as organized anarchies or “garbage cans.” They suggest an image of organizations in which collective rationality plays little role. They evoke not only the contingent nature of decision-making, but also the ambiguity of means-end relations and confusion between problems and solutions. Some trustees and managers pick “goodies” from a garbage can (the foundation and its programs) and discard their problems, which others, including grantees, then pick as their solutions to actual or perceived problems. One example of a so-called “garbage can” is the Nigerian Association of Development Agencies (NADA),4 a consortium of private voluntary organizations or NGOs (see Anheier and Romo 1999: 248–252). In the 1980s, a US foundation made a grant available to ERA, a local NGO, to establish NADA as a national NGO forum for achieving greater political clout. The first national consultation was met with great interest: over 60 prospective Nigerian member organizations attended and elected an organizing committee. However, over the course of the following years, organizational difficulties multiplied, and three inaugurations had to be canceled because of the low turnout of NGOs and amid much confusion. The

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overseas foundation, ERA, and other involved organization blamed one another for the failure of NADA, which was ultimately abandoned. The case of NADA, and we could add others, illustrates the main characteristics of the garbage can model: •

• • •

Problematic preferences: considerable goal displacement occurred. For example, while NADA was initially intended to focus on training, information, and policy formulation, these goals were replaced by fund-raising as a main objective. Unclear approach: NADA relied on trial-and-error learning and had no overall business plan. Weak agents: ERA was considered “well-meaning but incompetent.” Fluid participation: coordination and communication problems, in particular due to the conflicting interests and the heterogeneous ideological background of its members, hampered the organization committee’s decision-making process.

These conditions made a rational planning process impossible. While the garbage can notion points to the scheming and at times cunning, even seemingly chaotic, behavior of organizations, it is, of course, something of a caricature. Several of Fleishman’s (2007) serious design flaws come together and create a chain of events with mostly weak links. Garbage cans are unlikely events and are located at the extreme failure continuum of Figure 2.1. That they do happen nonetheless points to a danger that foundations operating in complex, volatile environments can “get lost” through internal dynamics, on the one hand, and external influences, on the other.

Politics Goals vary in complexity and clarity, and so do contexts. The context of an intervention or program may involve relatively few actors with similar goals and values or a large number of actors with varied and conflicting goals and values. Contexts may also be benign and supportive of the foundation intervention or indifferent and even hostile. Over time, the context may move from being hostile to being supportive or vice versa. For example, the environment for JRCT’s work on freedom of information changed from hostile to moderately supportive and back again over a decade or more. Pew’s work on global warming similarly took place in a highly contested and volatile environment ( Capstick et al. 2015). In contrast, the Buttle Trust’s work with care leavers in higher education operated in a generally favorable political climate with a high level of bipartisan consensus (Leat 2007). The environment for the Barrow Cadbury Trust’s work on the Migrant Rights Network was consistently hostile (Thümler 2011), whereas for Mozaik, the inclement weather of the Balkan mountains rather than (or in addition to) the political climate was a continuing challenge (Leat 2014).

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More generally, foundations addressing complex problems often work in fields full of normative expectations and divergent views among stakeholders that are, to varying degrees, politicized and entrenched in disputes past and present. Two dimensions of politicized fields are particularly relevant: salience and style. Salience generally refers to the overall political relevance of an issue or problem and the potential benefits or detriments stakeholders directly and indirectly associate with potential interventions. For example, when KBF embarked on the Training of Imams project, its salience in Belgian politics and society was relatively low; a similar project after the terrorist incidents in the mid-2010s would be a matter of high salience and receive the highest levels of public scrutiny. Style means the degree of contestation versus consensus associated with a specific field and the extent to which organizational strategies in terms of cooperation and coalition building versus conflict and competition prevail. For example, the activities of the Mercator Foundation in Germany to combat the negative effects of climate change take place in a cooperative and consultative style across the political spectrum and with the support of important economic actors (Stiftung Mercator 2018); in the US, the Hewlett Foundation’s Madison initiative to assess the state of American democracy faces a much more combative field of political and economic interests, especially under the Trump presidency (Hewlett Foundation 2018). Relating the salience of any given field to prevailing styles offers foundations distinct patterns for strategic actions and choices, each with specific potentials as well as risks (Table 2.2). Steady state : In these scenarios, expectations remain relatively dispersed and are generally regarded as a matter of low importance beyond the occasional lip service being paid to their significance and contribution. The field resembles a low-key “muddling through” with inconclusive outcomes largely due lack of interest by the major parties and constituencies that shape agendas. Foundations design and implement programs in consensual ways, with relations among actors generally being cooperative. Performance measures are uncontested, may matter little, and become part of ritualistic reporting. For example, inspired by the German literature movement of the 1980s, the Freedom of Expression Foundation (Fritt Ord) initiated and supported the establishment of the Norwegian House of Literature (Litteraturhuset) in Oslo. Fritt Ord TABLE 2.2 Salience and style

Low Salience Issue or Problem

High Salience Issue or Problem

Consensus as dominant style

Steady State

Support and Coordination

Ritualistic performance measures

Negotiated and agreed-upon performance measures

Conflict as dominant style

Low-Key Coordination

Politicking and Strategizing

Satisficing agreement on performance measures

Contested, competing performance measures

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leased a building from the Norwegian government and renovated the former Oslo Teachers’ College from 2006 to 2007. Europe’s largest literature house was opened to the public in the fall of 2007 and run by the independent Norwegian House of Literature Foundation. The House of Literature promotes Norwegian as well as international literature to children, teenagers, and adults. It also includes a café, a bookstore, and multiple event rooms. Moreover, the house offers working and living space for local and visiting writers (MacDonald and Tayart de Borms 2010). Fritt Ord initially planned to support the house until 2014 and hoped the institution could finance itself going forward. However, when the importance of the house for the cultural scene of Oslo became clear, Fritt Ord extended its financial commitment for an additional seven years. Its main goal was to ensure the stability of the institution’s private-public funding. On the one hand, the house makes its own revenue by hiring out event spaces and through sponsorship support. On the other hand, Fritt Ord continues to advocate for funding by the city and the state. Overall, the relationship between the different actors seems very cooperative because of their common commitment to the House of Literature ( Sejersted and Rieber-Mohn 2014). Support and coordination: In this scenario, policies and projects reflect a relatively well-coordinated attempt by key actors to provide an enabling environment for change. Having recognized the importance of the problem and the merit of the project and its programs, the relevant stakeholders are appreciative of its potential and reach a broad consensus. They inform each other accordingly, and activities are conducted in a cooperative style. Performance measures are negotiated, agreed upon, tested, and accepted. The Aventis Foundation’s TB Free is an example (Anheier and Hawkes 2008). It aims at reducing tuberculosis (TB) infection rates in South Africa by involving local communities through volunteers, traditional healers, grassroots groups, churches, and so on to (a) help administer and complete the treatment course for TB patients as part of a so-called “directly observed treatment system” (DOTS), (b) fight the stigma attached to TB at the community level, and (c) create better public awareness about the disease and its relationship with HIV/AIDS. As a foreign foundation, the foundation decided to establish and work through a not-for-profit organization created for the purpose of the project called “TB Free,” in a partnership that includes the Nelson Mandela Foundation and the Government of South Africa to establish training centers for DOTS, as well as for administering foundation funds locally. The foundation signed a contract with the National Department of Health to make sure that the government would take over the program after five years and ensure its long-term sustainability. The result was a complex public–private partnership that worked relatively well and showed results ( Sanofi 2013; www.aventis-foundation.org). At the beginning, however, the project faced major and chronic accountability challenges, and managing them consumed a considerable amount of managerial effort and resources. These tensions were often between “doing the project” and “accounting for it” to different stakeholders, especially at the local level in South Africa.

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Being accountable is a way of building legitimacy, and this was, in part, achieved through negotiating and agreeing on performance measures. Low-Key Coordination: While the field or problem remains a matter of low salience, low-key efforts are being made to move agendas forward. Foundations are aware of the ideological sensitivities involved and the diversity of actors across constituencies. Initiatives remain cautious and largely restricted to fact-finding, dialogue, and constituency-building in preparation for more ambitious programs in the future. Foundations can act cautiously, benefit from cooperative relations, and build coalitions and even new institutions in addressing the problem in question. Performance measures are negotiated but not deeply questioned, with “satisficing” agreements around some consensus of what would constitute acceptable performance. The Portuguese Immigrant Doctors’ Recognition Project is one example. It was a joint venture between the Calouste Gulbenkian Foundation, the Portuguese Ministry of Health, and the Jesuit Refugee Service. From 2003 to 2005, the program offered support to 120 trained foreign doctors, legally living in Portugal during their qualification recognition processes. With the financial backing of the foundation, the Jesuit Refugee Service offered grants for language courses, internships, and professional literature and also supported the doctors through various bureaucratic processes and enrolment in the Portuguese Medical Association (Campos Franco 2011). With the help of the Jesuit Refugee Service, the influential and well-networked Calouste Gulbenkian Foundation identified all relevant partners and managed the cooperation between them; one result was that the Ministry of Health supported the initiative and agreed to integrate the successfully recognized doctors. Another result of the foundation’s cooperative approach was that the SEF (Foreigners and Borders Service) agreed that immigrants should be able to maintain their residential permits during the recognition process, and as long as they were participating in the project, they were allowed to live legally in Portugal. In addition, the five national medical schools supported the project and worked together with the other partners to ensure its success (Reis Oliveira and Fonseca 2013). The project succeeded in integrating 106 immigrant doctors into the Portuguese National Health System. This was a life-changing opportunity for these professionals, who previously had to make their living as cab drivers, on construction sites, or in restaurants. The underlying idea of the project was to invest in an experimental, innovative initiative on a small scale, which could then be replicated by other organizations. The Calouste Gulbenkian Foundation risked potential failure but continued to improve the project design so that future projects would be less risky and able to serve a larger client base ( Campos Franco 2011). Politicking and Strategizing: In this type of scenario, setting goals and devising programs becomes ever more complicated and important because of the relatively high stakes that are involved in wider political and other terms. Powerful interests and their respective representative bodies at local, national, and international levels

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are watchful of every step taken toward the formulation of policies and action plans. Policymaking and planning is characterized by active positioning, even scheming, among key players and include a broad range of tactics like preventive stalling, deal-making, and bullying. No broad-based consensus seems to emerge among the major parties involved. Relations among parties tend to be confrontational, patronizing, condescending, and adversarial. Performance measures are generally contested and politicized. There may well be competing measures, resting on different normative expectations. One example, to be presented in more detail later in Chapter 3, is the Walton Family Foundation’s work in education. In the mid-1990s, the foundation began to support so-called charter schools, which receive government funding but have more autonomy than traditional public schools. Instead of being affiliated with a board of education, the governance of these schools is detailed in charter plans developed by educators, parents, community leaders, and others. The K–12 Education Program is based on the foundation’s belief that the most efficient way to improve education is to transfer financial control from local and state politicians to parents by giving them the choice of which school their child attends. However, after initially providing direct support to new charter schools, from the early 2000s on, Walton opted to provide indirect funding via support organizations. The rationale behind this was a worsening political climate; legislators had come under increasing pressure by communities to limit and control the growth of charters (Lund et al. 2003). Overall, the Walton Family Foundation’s large-scale involvement in the American school sector continues to be contested and the success of charter schools questioned in particular by the left (Rich 2014). Because of the importance of the issue, education is a highly politicized field of action for a foundation. Clearly, the strength and clarity of signals varies by field, as do incentives. Signals are likely to be strongest and most complex in fields characterized by politicking and strategizing. At the same time, incentives are unlikely to amplify proportionately, especially once grants have been made and sunk costs incurred. The governance structure will hold foundations back, and while they can take the longer view because of their endowment, incentives may shift from pursuing a previously agreed-upon set of goals through a complex, politicized field to satisficing and sense-making accommodations of second-best outcomes, or, at worst, impending failure. Conversely, signals and incentives remain weaker in steadystate fields, with the other two combinations somewhere in between. One can look at the performance enigma as the collective result of foundation strategies and behaviors in these four fields, and at the ambiguity of outcomes as a result of varying complexity and dynamism, on the one hand, and the salience and cooperation/conflict patterns on the other. While some combinations would most likely account for ambiguous outcomes independent of whether a business, a government agency, or a nonprofit organization might be involved, it is the specific foundation form that adds to ambiguity because of the benign fallibility syndrome.

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Roles, comparative advantages, and disadvantages Notions of “success” and “failure” based on some performance metric or other may have limited relevance for foundations who see their roles as exploring and experimenting. Thus, the very idea that failure is to be avoided is questionable – a “failure” can also be successful learning, part of a trial-and-error approach to solving a complex problem. In this sense, foundations may be “neutral” regarding certain kinds of failure (and can afford to be because of their unique capacity to fail with no terminal consequences). In such cases, foundations do not set out to achieve but rather to open up. The literature identifies different roles of foundations, i.e., general patterns by which they approach goal attainment (see Prewitt 1999; Fleishman 2007; Anheier and Daly 2007; Anheier and Hammack 2010; Brest 2012): Innovation and the promotion of innovation in social perceptions, values, relationships, and ways of doing things has long been a role ascribed to foundations. For example, in its early years, the Rockefeller Foundation and the Rosenwald Foundation were pioneers in promoting black education in the American South ( Fleishman et al. 2007). Another example is Realdania in Denmark, which created and supports Klimaspring to work with businesses to develop innovative and sustainable approaches to dealing with extreme rainfall in cities (http://klimaspring.dk).5 Complementarity, whereby foundations serve otherwise under-supplied groups and their needs. In many European countries, foundations play a key role in providing support for disabled people and those with rare conditions. For example, about one-third of all German foundations in the field of social services see themselves in a complementary role to public sector provision (Anheier et al. 2017: 155). Substitution is where foundations take on financial functions otherwise or previously supplied by the state, particularly local government. For example, the consortium of foundations that came together to ensure that Detroit’s art collection was saved and pensions protected acted as, in effect, a substitute for government ( Saunders 2016); similarly, foundations in California began to pay for arts education in public schools and supported cultural institutions when local governments cut funds. For example, the Philanthropic Ventures Foundation supports art teachers in public SF Bay Area schools with art resource grants (PVF 2017), and the James Irvine Foundation partners with organizations like the Oakland Museum of California through the New California Arts Fund (JIF 2017). Build-out is where foundations create something new but with known ways and means, a role that can be described as “building-out” the facilities of a community or region, for example, supporting the creation, enhancement, or extension of a library, museum, or school. The Stavros Niarchos Cultural Center (www.snfcc.org) mentioned earlier would be one example here, as would the Gulbenkian art museums in Lisbon (gulbenkian.pt/museu), the Burda Art Museum in Baden-Baden (www.museum-frieder-burda.de), or The Broad, the contemporary art museum donated by the Ely Broad Foundation in Los Angeles (www.thebroad.org). Differentiating these roles is important, as they relate to performance measures, including the increasingly popular “impact investing” and its emphasis on the

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combination of social and financial returns ( Reeder and Colantonio 2013; Schober and Then 2015; Anheier et al. 2012). Measures are easier to define, establish, and complete for the build-out role than for innovation, with complementarity and substitution in between. In the case of build-out, the number of visitors, attendees, ticket sales or some other measure are frequently used, and in a straight forward sense, the higher these numbers relative to cost, the better the performance. In a second step, one could expand these measures by adding qualitative aspects, such as visitors’ satisfaction and the like. Indeed, one unintended consequence of the vogue for social return on investment models may be a tendency to concentrate on the “easy (to) measure” build-out roles rather than the much trickier innovation roles. Note that by the time the foundation begins to measure build-out performance, all expenditures are sunk costs and cannot be recuperated (if the expenditure is designated as an “investment,” there is an aspiration to recoup some of the costs – but it is an aspiration that may or may not be fulfilled). This is to some extent different for other roles: in the case of complementarity, the foundation performance is linked to that of the public sector, especially the interlock between public and private roles. A similar point can be made regarding supplementary roles, but with the difference that foundation performance is compared to that of the public provider, for example in supporting social services or providing arts education. Performance measurement is most demanding for innovation roles. As in the case of build-out, the performance can only be measured ex post, i.e., some, usually longer, period of time after the activity has been carried out. Here, too, the foundation incurs sunk costs, and the (social and financial) return on investment may be unclear for years to come. Furthermore, while the actual project may have developed a prototype of some social or other innovation, it may fail to be picked up by others or may have limited relevance a decade or so later. For these and other reasons, foundations seek to establish process performance measures that track the development of a project or intervention as it is being implemented. The constructive ambiguity that arises from benign fallibility, while applying to all roles, will be most pronounced in areas of innovation. It is here that results are uncertain, subject to different interpretations and on multiple time lines. In both complementarity and substitution roles, foundations have at least the potential for comparative assessments, typically the performance of public agencies. In the case of build-out, measures are relatively unambiguous, and the division of labor between providing “bricks and mortar” and making it all happen helps in reducing ambiguity. The literature on foundations also associates philanthropic foundations with different comparative advantages or strengths as well as disadvantages or weaknesses (Anheier and Leat 2006; Hammack and Anheier 2013). These are rooted in their dual independence, as described in Chapter 1, which is both their greatest strength and weakness. Among the advantages or strengths are the following: Social entrepreneurship, whereby foundations identify and respond to needs or problems that for whatever reason are beyond the reach or interest of market firms,

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government agencies, and existing nonprofit organizations. An example would be the Gulbenkian Foundation project, mentioned earlier, which saw an opportunity for certifying medical staff from overseas to work in the Portuguese health-care sector to solve two problems, the shortage of medical personnel in hospitals and the misemployment of trained medical staff ( Reis Oliveira and Fonseca 2013). Institution builder, whereby foundations act as institution builders and identify coalitions of individuals and organizations capable of action; they can offer financial resources as well as knowledge and insights to help new entities become self-sustaining. Examples include classic cases such as the public library system or the research university in the US; a more recent one would be the National MINT Forum in Germany (Mathematics, Informatics, Natural Sciences, Technology) (www.nationalesmintforum.de). Bridge-builder, whereby foundations form coalitions in order to find common solutions to social and other problems. As independent brokers, they can overcome institutional borders to open up new possibilities. For example, the JRCT brought conflicting parties together in a series of efforts later leading to the Good Friday Agreement in Northern Ireland (www.jrct.org.uk/northern-ireland). Another example is the Expert Council of German Foundations on Integration and Migration, which describes itself as an independent, interdisciplinary expert council that develops policy recommendations for integration and migration and makes information available to the public (www.svr-migration.de). Risk absorber, whereby foundations invest where there is great uncertainty and returns are doubtful; foundations can be especially well placed to support new ventures in social investments, research, scholarship, writing, and the arts, as well as in vital questions that have not yet entered the mainstream. The community development projects of the Ford Foundation (2002) or the social impact bonds in the UK (HM Government 2017) serve as examples. By the same token, it is possible to derive four essential weaknesses arising from the dual independence of foundations that can affect their performance (see Salamon 1995; Hammack and Anheier 2013) and, ultimately, their legitimacy. They are specific expressions of the benign fallibility syndrome: Insufficiency, whereby foundations are ineffective when lacking the resources needed to meet their goals. This disadvantage becomes acute when the foundation fails to recognize its own limitations. For example, a foundation seeks to address the causes of hunger in developing countries, but – due to limited resources – is only able to provide funds for short-term relief in a rather limited number of disaster areas. As a result, the foundation fails by over-extending itself, and while it may succeed in isolated cases, these are insufficient for sustained, larger changes to take hold. Another example is the Jacoby University Bremen, a private university in the north of Germany. Founded in 2001 as International University Bremen, the university changed its name after the Jacobs Foundation donated €200 million to the institution. However, the foundation had to reduce its support over the years as its resources turned out to be insufficient. Moreover, because of the 2008 global

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financial crisis, the foundation’s endowment had shrunk, and private companies failed to invest as planned. In addition, state funding continued to decrease. In 2017, the university faced close to €50 million in debt and an uncertain future amid downsizing ( Sundermann 2017). Particularism, whereby foundations disproportionately favor one specific group of beneficiaries based on value preferences. For example, a foundation offers extracurricular activities for students with a migration background from particular regions and now living in a specific catchment area. However, they do not include other students with learning disabilities from the same area. In such cases, the foundation may succeed in helping one group but failing another. For instance, the Ford Foundation acknowledged in November 2015 its own particularism. President Darren Walker had to admit that the Foundation’s new blueprint Ford Forward, which aimed to “disrupt inequality” did not mention people with disabilities. Advocates highlighted the fact that the foundation also neglected people with disabilities in its strategy, its hiring policy, and the accessibility of its building and websites. On behalf of the foundation, Walker promised to address the issue of disability rights and to challenge the “Foundation’s institutional privilege and ignorance” (Walker 2016). While this is a rather specific example, many foundations are almost by definition particularistic. One obvious manifestation is foundations that support certain religious communities. The Dan Murphy Foundation and the Koch Foundation support exclusively Catholic projects. Similar examples can be found among evangelical foundations and Jewish and Muslim philanthropies (Hammack and Anheier 2013: 149). Amateurism describes the decision-making by (often well-meaning) foundation boards that possess only a cursory understanding of the fields and issues they address. For example, a foundation donates a building, e.g., an opera house, a monument, or a museum, without a proper evaluation of local needs and longerterm cost implications, thereby often provoking local resistance. In such instances, foundations create philanthropic ruins, i.e., isolated investments unlikely to be sustained. Such a case happened when an obelisk by US-American artist Rita McBride was to be erected in the old town district of Cologne, Germany, in 2017. The nine-meter-high monument worth over €130.000 was funded by the Stiftung Kunst, Kultur und Soziales der Sparda-Bank West (the Art, Culture, and Social Foundation of Sparda-Bank West). Despite being a gift to the city of Cologne, the monument was highly contested, and it took almost three years to be approved by the city (Kohler 2017). One issue was that while the monument itself was free, the city had to pay for the concrete foundation, which cost over €40,000 (Meifert 2017). Other critics objected to the fact that the obelisk was a mere copy of McBride’s obelisk that was erected in Essen in 2010 and that a corporate foundation could single-handedly and unopposed influence the cultural landscape of the city (Report-K 2017). Overall, a well-meaning gift by the foundation turned out to be highly disliked by citizens and an administrative nightmare for the city.

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Paternalism describes the substitution of a foundation’s judgment for that of its beneficiaries – in particular the attitude that the foundation knows what is good for those it seeks to support. For example, a foundation issues recommendations on integration and migration without including or considering expert opinions from migrant communities themselves. The history of philanthropy in Victorian Britain is full of examples of paternalistic projects pursued by foundations (Prochaska 1990), as is the history of philanthropy in the US and Germany. For example, Teach for America (TFA), which is supported by multiple foundations, including the Walton Family Foundation, has been accused of paternalism. Since 1990, TFA has recruited young graduates from top universities to become teachers in low-income and underserved communities. Critics argue that the training program is too short to prepare corps members for their work in disadvantaged schools, and the program length of merely two years in fact destabilizes schools. Moreover, teachers’ unions criticize TFA for employing inexperienced teachers at professional teachers’ costs ( Schonfeld 2013). In the international field especially, foundations are accused of paternalistic behavior. For example, Benjamin and Quigley write about the US foundations’ support of democratization in Eastern Europe, “While [the] democratic model works relatively well in the US context, it is not easily exportable. There was an implicit sense that US foundations were involved in helping make Eastern Europe ‘more like us’ ” (2010 : 257). However, too often, these foundations substantially lacked the knowledge of local contexts and the vastly different experiences across Eastern Europe; in many instances, amateurism and paternalism collided. Foundation weaknesses can be seen from two sides. For example, amateurism may be seen as the flip side of refusing to be deterred by red tape and “it can’t be done.” This dual aspect of weaknesses is indicative of the constructive ambiguity around measures of foundation “success” and “failure.”

Notes 1 See also historical success and failure cases described in Hammack and Anheier (2013) in the context of US philanthropy as well as Chapter 12 in Fleishman (2007). 2 Multinational tobacco firms are increasingly focusing on South Asian and African markets, especially because of the lack of consumer protection. The WHO argued that this strategy de facto means “exporting the death and harm” to poorer nations. There are an estimated 77 million smokers in Africa. The number is predicted to increase by approximately 40% from 2010 levels by 2030 (Boseley 2017). In South Asia, smoking rates are also rising; e.g., Indonesia has one of the highest male smoking rates worldwide (67%) and is expected to become the world’s largest market for tobacco (Coca 2016). 3 In many countries, foundation board members are unpaid. They are motivated to give their time freely by a range of factors, including prestige, interest in the work, and a desire to “do good.” When the work becomes more familiar and likely less interesting or the amount of “good” achieved is perhaps less than hoped, trustees may seek to re-kindle their interest with a new project or program, irrespective of whether the mission has been accomplished. This is a case of weak incentives combining with satisficing, leading to benign fallibility. 4 Names and acronyms used in this example are fictitious.

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5 Innovations can yield both positive and negative outcomes and impacts. Some innovations are not only controversial but become generally accepted as unfortunate or worse, while others yield sustained and positive change.

References Anheier, H., & Daly, S. (Eds.). (2007). The Politics of Foundations: A Comparative Analysis. London, UK; New York, NY: Routledge. Anheier, H. K., Förster, S., Mangold, J., & Striebing, C. (2017). Stiftungen in Deutschland 1: Eine Verortung. Wiesbaden: Springer VS. Anheier, H. K., & Hammack, D. C. (Eds.). (2010). American Foundations: Roles and Contributions. Washington, DC: Brookings Institution Press. Anheier, H. K., & Hawkes, A. (2008). Accountability in a Globalizing World. In M. Kaldor, H. K. Anheier, M. Albrow, & M. E. Price (Eds.), Global Civil Society 2007/8: Communicative Power and Democracy (pp. 124–143). London, UK: Sage Publications. Anheier, H. K., & Leat, D. (2006). Creative Philanthropy: Toward a New Philanthropy for the Twenty-First Century. Oxon; New York, NY: Routledge. Anheier, H. K., & Romo, F. P. (1999). Stalemate: A Study of Structural Failure. In H. K. Anheier (Ed.), When Things Go Wrong: Failures, Bankruptcies, and Breakdowns in Organizations (pp. 241–272). Thousand Oaks, CA: Sage Publications. Anheier, H. K., Schröer, A., & Then, V. (Eds.). (2012). Soziale Investitionen: Interdisziplinäre Perspektiven (1. Aufl.). Wiesbaden: VS Verlag für Sozialwissenschaften. Benjamin, L. M., & Quigley, K. F. F. (2010). For the World’s Sake: U.S. Foundations and International Grant Making, 1990–2002. In H. K. Anheier & D. C. Hammack (Eds.), American Foundations: Roles and Contributions (pp. 237–261). Washington, DC: Brookings Institution Press. Bolognesi, D., & Palenzona, P. (2011). Money Can’t Buy Happiness: It Helps Though: The Social Micro-Credit Programme of the Compagnia di San Paolo (CSI Research Project Strategies for Impact in Philanthropy No. Case Study CSI TC 005). Heidelberg: Centre for Social Investment of Heidelberg University. Boseley, S. (2017, July 12). Threats, Bullying, Lawsuits: Tobacco Industry’s Dirty War for the African Market. The Guardian. Retrieved from www.theguardian.com/world/2017/ jul/12/big-tobacco-dirty-war-africa-market Brest, P. (2012). A Decade of Outcome-Oriented Philanthropy. Retrieved 24 November 2017, from https://ssir.org/articles/entry/a_decade_of_outcome_oriented_philanthropy Campos Franco, R. (2011). Exercising Political Leadership: The Immigrant Doctors’ Recognition Project and the Calouste Gulbenkian Foundation (CSI Research Project Strategies for Impact in Philanthropy No. Case Study CSI TC 008). Heidelberg: Centre for Social Investment of Heidelberg University. Capstick, S., Whitmarsh, L., Poortinga, W., Pidgeon, N., & Upham, P. (2015). International Trends in Public Perceptions of Climate Change over the Past Quarter Century. Wiley Interdisciplinary Reviews: Climate Change, 6 (1), 35–61. https://doi.org/10.1002/wcc.321 Charter, D. (2018, January 5). Hardliner Viktor Orban Has George Soros’s Liberal University in Sights. The Times. Retrieved from www.thetimes.co.uk/article/hardliner-viktororban-has-george-soross-liberal-university-in-sights-whqsgk86t Coca, N. (2016, July 13). Indonesia on Track to Become World’s Largest Tobacco Market. Southeast Asia Globe Magazine. Retrieved from http://sea-globe.com/indonesia-largesttobacco-market-smoking/ Collins, J. C. (2001). Good to Great: Why Some Companies Make the Leap . . . and Others Don’t. New York, NY: HarperBusiness.

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Collins, J. C. (2005). Good to Great and the Social Sectors: A Monograph to Accompany Good to Great: Why Some Companies Make the Leap . . . and Others Don’t. New York, NY: HarperBusiness. Davies, J. S. (2004). The Foundation as a Political Actor: The Case of the Joseph Rowntree Charitable Trust. The Political Quarterly, 75(3), 275–284. https://doi.org/10.1111/j.1467923X.2004.00612.x Fleishman, J. L. (2007). The Foundation: A Great American Secret: How Private Wealth Is Changing the World. New York, NY: Public Affairs. Fleishman, J. L., Kohler, J. S., & Schindler, S. (2007). Casebook for the Foundation: A Great American Secret. New York, NY: PublicAffairs. Ford Foundation. (2002). Building Assets to Reduce Poverty and Injustice. New York, NY: Ford Foundation. Retrieved from www.fordfound.org/media/1715/2002-building_ assets-to-reduce-poverty-and-injustice.pdf Frum, D. (2017, April 10). Freedom Fights for Survival in Hungary. The Atlantic. Retrieved from www.theatlantic.com/international/archive/2017/04/ceu-orban-hungary/ 521868/ Giloth, R., & Gewirtz, S. (2009). Philanthropy and Mistakes: An Untapped Resource. The Foundation Review, 1(1). https://doi.org/10.4087/FOUNDATIONREVIEW-D-09-00008 Grob, G. (2011). RWJF’s Tobacco Work: Major Programs, Strategies and Focus Areas (RWJF Retrospective Series). Princeton, NJ: Robert Wood Johnson Foundation. Hammack, D. C., & Anheier, H. K. (2013). A Versatile American Institution: The Changing Ideals and Realities of Philanthropic Foundations (1st ed.). Washington, DC: Brookings Institution Press. Hewlett Foundation. (2018). Madison Initiative. Retrieved 13 February 2018, from www. hewlett.org/strategy/madison-initiative/ HM Government. (2017, September 26). Social Impact Bonds: GOV.UK. Retrieved 13 February 2018, from www.gov.uk/guidance/social-impact-bonds Ignatieff, M. (2017, June 2). Hertie School Commencement Speech 2017. Retrieved 12 February 2018, from www.hertie-school.org/en/debate/detail/content/ceu-presidentmichael-ignatieff-hertie-school-commencement-speech-2017/ The James Irvine Foundation (JIF). (2017). Arts Engagement. Retrieved 24 November 2017, from www.irvine.org/arts/who-we-fund Kohler, J. S. (2007). Sustainable Environment Programs: Pew Charitable Trusts, 1990. In J. L. Fleishman, J. S. Kohler, & S. Schindler (Eds.), Casebook for the Foundation: A Great American Secret (Case 70). New York, NY: Public Affairs. Kohler, M. (2017, July 21). Obelisk. Süddeutsche Zeitung. Retrieved from www.sueddeutsche. de/kultur/skulptur-obelisk-1.3597871 Krüger, S. (2011). Tapping Local Expertise and Creating Networks: Stiftung Interkultur and the Intercultural Garden Movement (CSI Research Project Strategies for Impact in Philanthropy No. Case Study CSI TC 009). Heidelberg: Centre for Social Investment of Heidelberg University. Leat, D. (2007). Just Change: Strategies for Increasing Philanthropic Impact. London, UK: The Woburn Place Collaborative. Leat, D. (2014). The Inventive Foundation: Creating New Ventures in Europe. London, UK: Barrow Cadbury Trust; Paul Hamlyn Foundation; Calouste Gulbenkian Foundation. Leat, D. (2016). Philanthropic Foundations, Public Good and Public Policy. London, UK: Palgrave Macmillan. List, R. (2011). The Joseph Rowntree Charitable Trust’s Support for the Freedom of Information Campaign: Are We There Yet? (CSI Research Project Strategies for Impact in Philanthropy

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No. Case Study CSI TC 010). Heidelberg: Centre for Social Investment of Heidelberg University. Lund, C. N., Hassel, B. C., & Smith, K. (2003). Charter Schools: Challenges and Opportunities. Philanthropy. Retrieved from www.philanthropyroundtable.org/topic/excellence_ in_philanthropy/charter_schools_challenges_and_opportunities MacDonald, N., & Tayart de Borms, L. (2010). Global Philanthropy. London, UK: MF Publishing Ltd. March, J. G., & Olsen, J. P. (1979). Ambiguity and Choice in Organizations (2nd ed.). Bergen: Universitetsforlaget. Meifert, J. (2017, January 17). Kunstwerk in Köln: Wo bleibt der Obelisk für den Breslauer Platz? Kölnische Rundschau. Retrieved from www.rundschau-online.de/region/koeln/ kunstwerk-in-koeln-wo-bleibt-der-obelisk-fuer-den-breslauer-platz-25566656 Meyer, M. W., & Zucker, L. G. (1989). Permanently Failing Organizations. Newbury Park, CA: Sage Publications. Perrow, C. (1986). Complex Organizations: A Critical Essay by Charles Perrow. New York, NY: Random House. Philanthropic Ventures Foundation (PVF). (2017). Arts Resource Grants Program. Retrieved 24 November 2017, from www.venturesfoundation.org/programs/teacher-grants/artsresource-grants-program/ Prewitt, K. (1999). Foundations as Mirrors of Public Culture. American Behavioral Scientist, 42 (6), 977–986. https://doi.org/10.1177/00027649921954697 Prochaska, F. K. (1990). Philanthropy. In F. M. L. Thompson (Ed.), The Cambridge Social History of Britain: 1750–1950 (Vol. 3, pp. 357–394). Cambridge: Cambridge University Press. Reeder, N., & Colantonio, A. (2013). Measuring Impact and Non-Financial Returns in Impact Investing: A Critical Overview of Concepts and Practice (No. EIBURS Working Paper 2013/01). London, UK: LSE. Retrieved from https://files.lsecities.net/files/ 2013/10/Measuring_Impact-full-length-Oct-20131.pdf Reis Oliveira, C., & Fonseca, V. (2013). Highly Skilled Immigrants in Portugal: Analysing Policy Developments and Its Impacts with a Typology. Revista Migrações, 11, 79–117. Report-K. (2017, June 14). Obelisk am Breslauer Platz kommt. Retrieved 24 November 2017, from www.report-k.de/Koeln-Nachrichten/Koeln-Nachrichten/Obeliskam-Breslauer-Platz-kommt-78754 Rich, M. (2014, April 25). A Walmart Fortune, Spreading Charter Schools. The New York Times. Retrieved from www.nytimes.com/2014/04/26/us/a-walmart-fortune-spreadingcharter-schools.html Roth, N. (2004). The ‘Lugna Gatan’ Project: An Example of Enterprise in Crime Prevention Work. Drugs: Education, Prevention and Policy, 11(3), 193–198. https://doi.org/10.1 080/09687630410001669662 Rouleau, L., Gagnon, S., & Cloutier, C. (2008). Revisiting Permanently-Failing Organizations: A Practice Perspective (Les cahiers de recherche du GéPS No. Vol. 2, No. 1). Retrieved from http://geps.hec.ca/wp-content/uploads/2013/09/GePS-08-01.pdf Salamon, L. M. (1995). Partners in Public Service: Government-Nonprofit Relations in the Modern Welfare State. Baltimore, MD: Johns Hopkins University Press. Sanofi. (2013). Sanofi: TB Free Campaign. Retrieved 24 November 2017, from www. sanofi.co.za/l/za/en/layout.jsp?scat=60BDE26E-AD81-4143-B62D-F9575E6954F3 Saunders, P. (2016). Detroit’s ‘Grand Bargain’: A Model for Others? Retrieved 24 November 2017, from www.forbes.com/sites/petesaunders1/2016/05/07/detroits-grand-bargain-a-modelfor-others/

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Schober, C., & Then, V. (2015). Praxishandbuch Social Return on Investment: Wirkung sozialer Investitionen messen. Stuttgart: Schäffer-Poeschel Verlag für Wirtschaft Steuern Recht GmbH. Schonfeld, Z. (2013, July 12). Meet the Teach for America Resistance Movement That’s Growing from within. The Atlantic. Retrieved from www.theatlantic.com/national/ archive/2013/07/meet-teach-america-resistance-movement-s-growing-within/ 313358/ Seibel, W. (1996). Successful Failure: An Alternative View on Organizational Coping. American Behavioral Scientist, 39 (8), 1011–1024. Seibel, W. (1999). Successful Failure: An Alternative View of Organizational Coping. In H. K. Anheier (Ed.), When Things Go Wrong: Organizational Failures and Breakdowns (pp. 91–104). Thousand Oaks, CA: Sage Publications. https://doi.org/10.4135/9781452231457 Seifert, A., & Zentner, S. (2010). Service-Learning: ‘Lernen durch Engagement’. Methode, Qualität, Beispiele und ausgewählte Schwerpunkte (Netzwerk Lernen durch Engagement). Weinheim: Freudenberg Stiftung. Retrieved from http://wp1043568.server-he.de/ fileadmin/user_upload/dokumente/3Pub_Wissen_LdE.pdf Sejersted, F., & Rieber-Mohn, G. F. (2014, September 30). Misvisende om Fritt Ord og Litteraturhuset. Retrieved 24 November 2017, from www.frittord.no/langtidsprosjekter/ litteraturhuset-ind/misvisende-om-fritt-ord-og-litteraturhuset/ Stiftung Mercator. (2018). Mercator Research Institute on Global Commons and Climate Change (MCC). Retrieved 13 February 2018, from www.stiftung-mercator.de/en/ partnergesellschaft/mercator-research-institute-on-global-commons-and-climatechange-mcc/ Sundermann, S. (2017, August 31).2018 wird es für die Jacobs-Uni kritisch. Weser-Kurier. Retrieved from www.weser-kurier.de/bremen/bremen-stadt_artikel,-2018-wird-esfuer-die-jacobsuni-kritisch-_arid,1642365.html Thümler, E. (2011). The Migrants’ Rights Network of Barrow Cadbury Trust: What Impact Can We Hope to Have? (CSI Research Project Strategies for Impact in Philanthropy No. Case Study CSI TC 017). Heidelberg: Centre for Social Investment of Heidelberg University. von Schnurbein, G. (2011). Filling the Glass: Creating Impact through Social Capital (CSI Research Project Strategies for Impact in Philanthropy No. Case Study CSI TC 011). Heidelberg: Centre for Social Investment of Heidelberg University. Walker, D. (2016, September 12). Ignorance Is the Enemy within: On the Power of Our Privilege, and the Privilege of Our Power. Retrieved 24 November 2017, from www. fordfoundation.org/ideas/equals-change-blog/posts/ignorance-is-the-enemy-withinon-the-power-of-our-privilege-and-the-privilege-of-our-power/ Wooster, M. M. (2006). Great Philanthropic Mistakes. Washington, DC: Hudson Institute.

3 CASE STUDIES OF BENIGN FALLIBILITY, WITH OLIVIA KNODT AND CHARLOTTE KOYRO

Introduction The case studies in this chapter illustrate our main argument: the dual independence combined with the governance structure of foundations creates private agency unparalleled in self-sufficiency and autonomy. This independence is also the source of their relative strengths and weaknesses, as argued in Chapter 1 and as elaborated in Chapter 2. As a result, foundations can suffer from chronic signal and incentive deficiencies, i.e., the benign fallibility syndrome. Their independence suggests that foundations have distinct advantages in addressing complex and even wicked problems. They often work in complex, dynamic environments that may be characterized by contestation over approach and performance. The benign fallibility syndrome tilts foundations toward satisficing by aiming for achievable goals as initial objectives become problematic, and they tend to engage in self-justification when accounting for results. Ultimately, ambiguity of outcome becomes symptomatic as foundations build up inertia until change or renewal happens through, for example, changes in leadership. However, foundations are not helpless victims of benign fallibility. As we will see in some of the case studies, engaged boards and proactive management styles can steer a foundation away from missing signals and setting weak incentives or sanctions for staff. They can change mid-course in a project and seek sometimes dramatic drastic changes. In other instances, however, the syndrome prevails, and despite their best intentions, projects produce results less – and sometimes, much less – than what was initially intended. Chapter 4 will follow up on the governance and management lessons as well as the implications for addressing the benign fallibility syndrome. The cases included in this chapter typically deal with complex situations that involve dilemmas and take place under sometimes changing conditions. They are

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richer than their summary descriptions and interpretations given here; however, such brevity might be justified insofar as, when taken together, the cases aim to exemplify different perspectives of one major insight: for foundations, the notions of what constitutes and leads to “success” and “failure” are not as clear cut as they may seem at first or at face value or simple performance metrics would suggest. The purpose of the following case studies is to understand why such ambiguous outcomes might be the case and implications for foundation representatives and experts – again, a topic we pick up in Chapter 4. In Chapter 1, we laid out the disjointed governance structure of foundations and its three critical elements: the relationships between donor and trustees, between trustees and management, and between management and grantees ( Figure 1.1). The relationships, while each special, have in common that they involve typical principal-agent problems and moral hazards that, in a context of weak signals and incentives, give rise to a certain ambiguity of outcomes. Few of the foundations in the cases included here made use of log frames and monitoring systems to track performance. Some paid at least lip service to strategic philanthropy, and while systematic reporting happened in some cases, it mostly did not. As a result, there are no comprehensive evidence bases that cover the various stakeholder perspectives and accounts over the project cycle. One way to approach this problem would be to look at each of these stakeholder relationships separately and to judge how mutual expectations played out relative to performance. However, such an approach assumes that information is indeed available from six different perspectives, i.e., two for each relationship depicted in Figure 1.1: donor and trustees, trustees and management, and management and grantees. Each would offer accounts of what happened or did not happen, when, to what effect, and why. These accounts, colored by the very sense-making tendencies discussed in Chapter 1, are likely to differ at least to some extent. In the end, however, and even when nearly complete, these accounts would amount to a contradictory evidence base. Therefore, we decided to focus on the “bigger picture” of how the foundation and its project fit into the wider context in which a particular project or initiative took place. By this, we refer to the task environment and its politics, the roles the foundation assumed, the advantages it brought to bear, and whatever disadvantages or weaknesses became apparent. Within this wider context, we focus on ambiguities relative to the results and outcomes achieved, emerging or evident, and do so by looking at the same case, i.e., a project or intervention, from three related perspectives to cover the governance relations: •

How does the foundation’s initial plan compare to its own view of the project’s outcomes? Put simply, did the plan and its intended vision become reality, and how did the foundation account for any differences? Importantly, data are rather patchy on this key question and indeed indicative of the performance enigma and satisficing and sense-making tendencies under uncertainty. As

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•

•

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the case studies show, objectives and plans were often vague and evolved over the course of the program. How did the foundation’s actual activities in addressing a problem or set of issues work out? In other words, did project activities make a difference and lead to some improvements, and how did the foundation account for what its activities achieved and what they did not? Again, the data is incomplete, as most foundations did not engage in systematic outcome measurement. How does the foundation’s assessment of its performance and accounts of project impact relate to the wider context in which the problem or issue is located? Or how did the foundation’s project relate to other developments taking place at about the same time as its intervention?

While the first two perspectives speak mostly to ambiguities emanating from internal assessments and interpretations, the latter addresses the external relationship between the foundation and the activities of other actors in terms of attribution. For example, unconnected to the activities of the foundation, the government could have passed new regulations affecting the issue at hand, market conditions could have changed, or nonprofit groups could have launched advocacy campaigns. In selecting the cases, we conducted a broad scan of foundation projects using literature and Internet-based searches and consulted with foundation experts and representatives, academics, and policymakers. As already mentioned in Chapter 2, we sought to identify, and asked for, cases of foundation projects regarded as successes and failures. We also probed for why a particular project succeeded and others failed to get a sense of the drivers behind such outcomes, both from structuralorganizational as well as from management and leadership perspectives. We vetted over 100 potential cases that were either found in the literature or suggested by experts that together spanned a wide range of problems, issues, and fields. As indicated in Chapter 2, to our surprise, very few clear success and failure cases were among them, but many had outcomes that suggested various degrees of ambiguity. We selected about thirty for writing up as vignettes. These are concise descriptions of each case along a sequence of questions that probe for problems or issues addressed, objectives, activities, time lines, processes, assessment criteria, deliverables, project results, and so on. Focusing on different perspectives and degrees of ambiguity, this set of thirty was then narrowed down to twenty. These we explored in more detail. Synoptic summaries of these cases covering the program description, objectives, performance aspects, and key issues emerging are found in the Appendix. From these twenty cases, we have chosen nine that taken together illustrate varying degrees of ambiguity and do so from different perspectives, especially in terms of the insights they offer for our understanding of foundations:

Walton Family Foundation, US The Walton Family Foundation offers financial and other support for the promotion and establishment of charter schools in selected areas in the US. This case

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highlights the fact that “public good” is a contested concept. A foundation may be effective in achieving its goals but be subject to criticism for the nature and effects of those goals.

King Baudouin Foundation, Belgium The King Baudoiun Foundation covered the initiation, convening, and support of an investigation into the training of imams as part of a wider program designed to promote integration of Muslims in Belgian society. This case illustrates the way in which a foundation may use its independence and neutrality to work on highly sensitive, controversial issues in which politicians are reluctant to become involved. The case also highlights the way in which external factors may undermine the underlying, longer-term achievements of a foundation.

Pew Charitable Trusts, US The Pew Charitable Trusts covered the initiation and ongoing support of a program designed to stimulate federal legislation addressing the causes of climate change; later the program focused on selected states and encouraging investment in renewable energy. This case illustrates the complex interaction between the work of a foundation and the changing policy environment around a poorly understood and easily politicized issue.

Fondazione Cariplo, Italy The Fondazione Cariplo covered the initiation and support of an ethical investment fund and design and promotion of social housing programs to meet the needs of people ineligible for public housing but too poor to afford private market rents. This case speaks to the importance of context-specific networks and governance structures, particularly in gaining financial support for a social investment and gaining acceptance of an innovative concept.

Robert Wood Johnson Foundation, US The Robert Wood Johnson Foundation offered long-term support and promotion of various initiatives designed to reduce teen tobacco use in selected states. This case illustrates the work of a foundation over nearly 20 years in a field dominated by a powerful industry lobby. It highlights the need for constant adaptation in the light of changing circumstances and prior success and failure. It also illustrates the power of cross-sector coalitions.

Joseph Rowntree Charitable Trust, UK The Joseph Rowntree Charitable Trust offered financial and other support for a campaign to promote freedom of information legislation. This case illustrates the

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importance of strong grantor-grantee relationships when a foundation supports a project with changing political support.

Mozaik Foundation, Bosnia-Herzegovina The Mozaik Foundation offered support for a social enterprise with the triple goal of providing employment opportunities in an economically depressed region, bringing together people from different ethnic communities, and creating a selfsustaining business. The case is about competing goals and unpredictability.

William and Flora Hewlett Foundation, US The William and Flora Hewlett Foundation covered the initiation, support, and convening of a large initiative that sought to achieve community-wide changes in three economically depressed and underserved cities. This case illustrates the challenges of pursuing a budding and still poorly understood concept and managing a wide array of actors without a clear theory of change or explicit goals.

Eberhard von Kuenheim Foundation, Germany The Eberhard von Kuenheim Foundation covered the initiation, support, and convening of a group of funders to revive a famous crystal glass factory in an economically depressed region. This case is about the successful attempt of a grantmaking foundation to strengthen entrepreneurship. The dilemma of the foundation developed out of an open project organization and high expectations of partners. These cases represent high and low complexity, stable and dynamic task environments, and variations in salience and style. For example, the Eberhard von Kuenheim Foundation and the revival of Theresienthal was politically relatively uncontentious, and the environment, while moderately complex, was relatively stable throughout the granting period – even though it became more volatile in the aftermath of the global financial crisis in 2008; by contrast, the project on climate change the Pew Charitable Trust undertook was politically contentious from the beginning and, in addition, operated in a rapidly changing environment. The cases vary not only in political sensitivity and the complexity and dynamism of the environments in which they operate; they are also geographically dispersed: they come from the US, the UK, Italy, Germany, Belgium, and BosniaHerzegovina. What is more, the cases are very different in the issues addressed. They range from tobacco use to the making of fine crystal and from social housing to the role of Islam in society. They are all relatively long-term projects, typically spanning five years or more, and involve not only a single grant or grantee but several, sometimes as part of a grants program. The cases do not focus on factors such as serendipity, i.e., fortunate but ultimately unintended decisions or circumstances leading to good outcomes, or unexpected “windfalls” or events that made for success. Similarly, they are not about purposive malfeasance and wrongdoing in foundations that may have contributed

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to failure, e.g., negligence, nepotism, embezzlement, or corruption. The cases are about how the main stakeholders, i.e., boards, management, and grantees, achieve good, ambiguous, or bad results through projects that can be judged against some intended, and ultimately identifiable, set of objectives. Finally, the cases fall into two loosely grouped sets. The first is made up of the Eberhard von Kuenheim Foundation and the Theresienthal project, Fondazione Cariplo and its social housing initiative, the Walton Family Foundation and the funding of charter schools, the Hewlett Foundation and its Neighborhood Improvement Initiative, and the Mozaik Foundation and its Ekomozaik project. These five cases are, in different ways, about creating or recreating an institution to improve existing conditions, either in a market context (e.g., Theresienthal), education (e.g., charter schools in the US), or civil society (e.g., the Neighborhood Improvement Initiative). To varying degrees, these projects were also to challenge existing systems: the Eberhard von Kuenheim Foundation and Mozaik sought to provide employment, and Fondazione Cariplo intervened in the housing market, the Walton Foundation in the education system, and the Hewlett Foundation in neighborhood social infrastructure. The second group of cases is different from the previous ones, as they are not about creating new institutions, models, or services but rather aim at changing existing attitudes and behaviors: JRCT had to overcome government inertia and opposition; the RWJF and Pew were up against powerful industry and government lobbies; KBF did not have to fight government or business, but it did have to overcome public ignorance and prejudice. These are cases where a foundation did something very unlikely to be undertaken by government or business, not least because the different issues were, in varying degrees, politically contentious. All four cases risked failure and, to some extent, reputational damage to the foundation.

A framework The framework for the presentation and analysis of the case studies is informed by the conceptual considerations laid out in Chapters 1 and 2. In presenting the cases, we take account of any peculiarities regarding the governance structure of the foundation, in particular, if any of the governance relations between the four major component elements or stakeholders stand out in any way, i.e., donors, trustees, management, or grantees. This governance structure is then put in the context of the task environment, goal structure, and politics before asking what roles the foundation assumed in addressing the problem or issue at hand and what, if any, comparative advantages and disadvantages can be identified. The case studies look at the importance of performance measures, how elaborate they were, and what significance they assumed in the course of the projects. Against the full description of the case, we assess the outcome in terms of possible ambiguities in what has been achieved through the project or intervention. Finally, we offer a synopsis of any additional insights the case offers for our understanding of foundation performance, which we will pick up in the concluding section of this chapter.

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Specifically, these case study narratives address the following questions, especially as they relate to the benign fallibility syndrome, as applicable: •

• • • • • • •

• • •

• •

Governance and management: Did the governance of the foundations (trustees) play an important, forward-looking role in the initial framing of the project? Did management, i.e., program officers, assume proactive measures in the way the project was planned and executed as well as its exit period, including final assessments? Task environment: Was the problem or issue addressed located in a high, medium, or low uncertainty context? Goals: Did the project or intervention target one or several goals, and what was their relationship in terms of potential goal conflicts or symbioses? Politics: Did the project or intervention take place in a steady state, supportive, low-key, or contested scenario? Roles: Did the foundation assume one major or a combination of roles, such as innovation, complementarity, substitution, or build-out? Advantages: Did the foundation realize any of the following potentials: entrepreneurship, institution-building, bridge-building, or risk absorption? Disadvantages: Did any of the potential weaknesses materialize, e.g., insufficiency, amateurism, or paternalism? Performance: How elaborate were performance measures? Were they agreed upon among all stakeholders, and how relevant were they before, during, and after the project? How pronounced and elaborate were framing attempts? Vision: Did the foundation’s plan and its intended vision become reality? Difference: Did project activities make a difference and lead to some improvements in relation to the problem or issue addressed? Attribution: What did the foundation’s project add relative to other developments or initiatives at that time? In other words, is there a direct link between the foundation and the outcome, or was it mitigated by other actors and their activities? Benign fallibility: To what extent did the syndrome materialize, if at all? Ambiguity: Do the more immediate results or longer-term outcomes of the project lend themselves to clear judgments as to its success or failure, or does ambiguity prevail? Was constructive ambiguity involved?

While we address these issues in the following cases studies, we do not do so in the preceding sequence; nor do we pay equal attention to all. Each case we examine has its own “plot lines” and narrative that lead us from an initial idea to a project or intervention and, finally, to some outcome. It is this thread that the presentation of the cases follows, put in the particular political context and task environment that prevailed. As we will see, context and environment often changed as the project developed, sometimes dramatically. We also remind the reader that the benign fallibility syndrome varies in its intensity across cases. It is more pronounced in some and rather subtle in others.

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The syndrome also varies within projects over time. Recall that we are not suggesting that all foundation projects are subject to the same extent or degree to the syndrome; to the contrary, governance and management styles matter, as does, of course, the organizational task environment. For orientation purposes and to help readers navigate the various case studies, we position each in a somewhat stylized organizational task environment along the two dimensions of complexity and dynamism (see Chapter 2, Table 2.1). However, note that in some of the cases, such positioning applies only to the initial period when a particular project got started; over time, task environments change in terms of complexity and dynamics, in some cases more so than in others. The JCRT case on the Freedom of Information Act, for example, went from high to low dynamism and back, while the charter school project of the Walton Family Foundation remained in a politicized scenario of high complexity and high dynamism throughout, even though their intensity varied.

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Case 1: Walton Family Foundation, US: charter schools funding Overview of the case This is a case of a foundation working on a complex issue riddled with externalities that has become increasingly politically contested in a dynamic environment. The foundation has adapted its strategies over the years in light of those changes. Because of growing opposition and politicization of the education reform movement, the foundation has adopted a more indirect role. Arguably, this is an issue in which multiple causal mechanisms are at work, but the foundation has chosen to focus on only one – the funding of autonomous schools of choice (Table 3.1.1). Though the foundation has not been immune to political challenges, it is one of the most powerful voices in the school reform movement and enjoys a high degree of financial autonomy. This, along with a solid network of partners, has afforded the foundation a degree of immunity to countervailing forces and the ability to remain on the same ideological path carved out by its founding members over thirty year ago.

The foundation The Walton Family Foundation (WFF) was created to continue the philanthropic work of Sam and Helen Walton, the founders of retailer Walmart. The foundation’s work is informed by a belief in the power of individuals to transform their own lives. It seeks to make grants that drive not just incremental but transformative change by forging important partnerships and investing in large-scale initiatives across entire cities and ecosystems. In its latest strategic plan, the foundation prioritizes a more holistic approach to reform by which communities are better informed and prepared for the systemic changes WFF seeks to promote. It has three program areas: K–12 education, conservation that helps communities thrive, and giving back to the home region. However, the Walton family members also invest in many other initiatives in line with their personal interests, which are not allotted to any one program. These include, for example, Alice Walton’s investments in the Crystal Bridges Museum of American Art – a billiondollar initiative – or Ben and Lucy Ana Walton’s grants for Postpartum Support International. These are listed as individual grants under “Special Projects” without further detail and made up about one-third of the foundation’s total spending TABLE 3.1.1 The charter school case in context

High Complexity High Salience Issue or Problem

Low Complexity

High Dynamism Conflict as dominant style

Charter school Funding A case of high complexity in a politicking and strategizing scenario

Medium uncertainty

Low Dynamism

Medium uncertainty

Low uncertainty

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of $454.4 million in 2016. The foundation is based in Arkansas and is separate from the company-sponsored Walmart Foundation.

Governance and management Five family members serve on the board of directors, with some 20 others contributing to WFF in other ways, such as through committee memberships. Last year, the family decided to downsize the board from twenty family members to the current five (Daniels 2016). This was part of an effort to streamline and restructure the foundation’s governance, so it can “act more urgently and effectively” (Walton Family Foundation 2017). Its three program priorities have remained the same. According to the late John Walton, the family has been extremely involved in every aspect of the foundation’s work since the beginning ( Cosgrove 2002). Thus, the board takes a very hands-on approach to management. Today, the second and third generations have taken charge and are led by board members Carrie Walton Penner, Alice Walton, Ben Walton, Rob Walton, and Stuart Walton. The foundation’s third executive director, Kyle Peterson, works to balance and implement the family’s diverse philanthropic interests and pursuits. Kyle Peterson came on board in June 2016 and is leading the foundation through its strategic plan for 2015 to 2020. In his previous capacity as philanthropic consultant at FSG (Foundation Strategy Group), Peterson advised foundations on how to develop clear goals and theories of change. He places this work within the broader context of strategic thinking that permeated the philanthropic world in the early 2000s (Aspen Institute 2017). WFF is among the foundations to have openly embraced the tenets of strategic philanthropy by prioritizing what the director of the education program, Marc Sternberg, calls “fact-based decisions” ( Sternberg and Holley 2016). But Peterson also understands the importance of the “second wave” of thinking on philanthropy that emerged in the late 2000s, which puts more of an emphasis on context, deep engagement with local communities, and adaptability (Aspen Institute 2017). Accordingly, he advises the foundation on how to embrace more context-based ideals. The latest strategic plan for K–12 education demonstrates a strategic tilt to this end but was developed before Peterson joined the foundation as executive director. This demonstrates that after assessing its previous approach, the foundation responded to signals that indicated that changes were necessary, albeit within the confines of its core beliefs on school reform.

Role of the foundation In this case, the foundation’s role is both substitutive and innovative. It is substitutive in the sense that it acts as a public service provider by facilitating the opening of hundreds of charter schools in cities throughout the US each year, often at the expense of traditional schools. In many cases, there has been a reallocation of resources from district schools to privately managed public schools. About 22% of all charter schools are operated by a charter management organization, which are typically nonprofit but

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also include for-profit organizations (Woodworth et al. 2017: 13). For-profit education management organizations are a growing phenomenon and an integral part of reform in many states (Ertas and Roch 2014). For instance, the largest charter school operator in Michigan is the National Heritage Academies, which is privately run (Dixon 2014). It is when district schools close that charter schools often fill the gap, as long as the political environment is conducive to this. In other cases, the foundation adds to the existing number of public schools to meet unaddressed needs. The foundation has also chosen to prioritize innovative proposals for charter schools. The proposals Walton accepts should have new ideas for school reform, including alternative approaches to career and technical education, enrolment models that include traditional (non-charter) schools, and alternatives to test scores for measuring performance (Walton Family Foundation 2018a). By focusing on innovation, the foundation is capitalizing on its dual independence to experiment with new approaches to school reform. These are risky, as the stakes for failure are high, and also difficult to assess.

Description of the specific program The Walton Family Foundation has been investing in K–12 education since 1992, which is the foundation’s second biggest investment by program; it spent $454 million in 2016 alone, more than its two other programs combined (Walton Family Foundation 2017). As part of its education program, the foundation provides grants to school developers to launch charter schools. The Public Charter Start-Up Grant funds grantee organizations that serve lowincome children in one of the target districts.1 To qualify for the grant, a developer must still be in “start-up” mode and be able to draw a majority of students from one of the foundation’s thirteen target cities (Walton Family Foundation 2018b). Start-up mode is defined as being anywhere between 15 months prior to filing a charter and the first year of operation. Once the criteria are met, the school is eligible for three different types of start-up grants: pre-authorization (up to $30,000), post-authorization (up to $220,000), and combination start-up (up to $250,000). Pre-authorization is designed to help developers implement their planned activities before their charter petition is approved, whereas a combination start-up grant is provided within the first year of operation. In addition to its start-up grants, the Walton Family Foundation provides funding to current grantees and offers additional financial support to the charter schools where students demonstrate exemplary performance. Each school is required to track its students’ performance using specific metrics and benchmarks (Walton Family Foundation 2018c).

Strategic plan 2020 Jim and Alice Walton are behind the “Building Equity Initiative,” which is a large-scale approach to funding new charter schools. The foundation has made the unprecedented commitment of $1 billion over the course of five years, the details of which are outlined in the foundation’s strategic plan for 2015 to 2020.

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As part of its new strategy, the foundation selected thirteen target cities that are “both full of need and ready for change” (Walton Family Foundation 2018a). In these districts, Walton provides grants to fund charter schools directly, but also supports state-level initiatives. In some cases, Walton is only active on the state-level.2 This difference can be explained by the variation in state laws regarding charter schools. For example, Arkansas – where Walton is based – does not have a threshold beneath which a school must automatically be closed, nor does it have any standards for quality authorizers.3 The complexity of the political environment in which the foundation works varies from state to state and often depends on the local boards, state education agencies, and the power of local teachers’ unions.4 The goals Walton has for its education initiative are city-dependent. Each of the thirteen cities where Walton works has been assigned to one of three categories. For instance, Washington, DC, New Orleans, and Denver are considered “proof point” cities, in which the foundation is most active. Here the aim is for lowincome students to achieve the same rate of college and career-readiness as those achieved by students attending a “Knowledge Is Power” (KIPP) charter school in these same cities, which is roughly 35%. If this goal is reached, the rate of college completion in these cities is predicted to increase by 300%. These cities are critical for the foundation’s strategy, as they “will serve as exemplars of the Walton Family Foundation’s theory of change” (Wisdom 2015). Second, “emerging” cities are on their way to being proof points and have the same long-term investment criteria. Next, there are the “big” cities, with a population larger than 250,000. Here, WFF takes a strategy whereby “any improvements can have significant impact due to the size of the city,” and the goals are less precise. Finally, “jumpstart” cities are places that require the most effort in terms of creating “mature choice ecosystems” (Wisdom 2015). Here, the foundation’s goal is to build the support for charter schools. See Table 3.1.2 for an overview of selected investment criteria: TABLE 3.1.2 Walton Family Foundation investment criteria

Proof Point and Emerging Cities

Jumpstart Cities

• Presence of significant high-quality school options • Existence of tools that make it easier for parents to find and select the best school for their child (e.g., common enrolment systems, studentbased budgeting, transportation) • Favorable policy environment • State and local political leadership aligned with choice and reform goals • Groups and systems with the ability to support parents who advocate for access to high-quality schools. • Availability of strong human capital

• City leaders interested in growing the number of autonomous, accountable schools • Potential to create tools that make it easier for parents to find and select the best school for their child • Favorable policy environment • Other funding partners • Opportunities for high-quality public charter school operators to expand • Limited education infrastructure

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Origins and rationale Importance of legacy The Walton Foundation first began working on education in the early 1990s, with the belief that the best way of promoting meaningful change was by focusing on alternatives to traditional public schools. The founding family members, Sam and Helen Walton, “believed their foundation was uniquely equipped to help low-income and minority children live the American dream and to support innovators, spark new ideas and achieve life-changing results” (Walton Family Foundation 2016b: 2). The early education grants proved unsustainable in the long-term, prompting the foundation to undertake research on how best to achieve impact. The foundation concluded that the most efficient way to improve K–12 education was to transfer financial control from local and state politicians to parents by giving them the choice of which school their child attends. On the initiative of John Walton, one of Sam Walton’s sons, the founder’s vision was therefore translated into support for school choice. Because of Sam’s pioneering work, the Walton Family Foundation was one of the first philanthropies to support the expansion of charter schools in the US (Walton Family Foundation 2018b). A charter school is a public school that is unaffiliated with the district board of education, in effect making it a one-school district. Educators, parents, community leaders, educational entrepreneurs, and others draft a charter plan outlining the school’s guiding principles, governance structure, and accountability measures. There are many different authorizers for charter schools, depending on the state. Generally, charter schools operate with increased autonomy in exchange for increased accountability driven largely by consumer demands for enrolment (PBS 2004). Although the Walton family has free rein to support causes it believes “foster equal opportunity and build a more just society,” the groundwork that John Walton laid in support of charter schools has created a path dependency for its strategy toward K–12 education that has held until today, albeit with minor course adjustments.

Theory of change The foundation’s theory of change is “to enhance student access to a high-quality education and educational opportunity” (Walton Family Foundation 2018a). Director of Education Marc Sternberg writes that the foundation is “deeply committed to the theory of change, which is that we have a moral obligation to provide families with high-quality choices” (PBS 2004). However, this is not a theory of change per se. Rather, it tells us what the foundation seeks to achieve, not how it seeks to do so. In fact, there is no difference between the foundation’s theory of change and its mission: Our mission is to improve K–12 outcomes for all students, especially those of limited means, by ensuring access to high-quality educational choices that prepare them for a lifetime of opportunity. ( Walton Family Foundation 2015)

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Based on WFF’s grantmaking, its implied theory is that school autonomy and school choice will provide students with better access to high-quality education. These are defining characteristics of charter schools, which the foundation has chosen as vehicles for its envisioned change. Although WFF also partners with some public school districts to create autonomous schools of choice, the principle remains the same. But to what extent this strategy is rooted in a theory of change is debatable. The foundation treats school autonomy and school choice as core principles of its work in what some might consider an ideological approach. This might be explained by the path dependency rooted in the strong family legacy.

The role of research Even though Walton’s theory of change is rooted in the free-market principles that led to the lucrative success of the Walton franchise, it also stresses the importance of research for its work. A senior advisor at Walton writes, “Research informs everything we do” (Manno 2017). But it is unclear precisely what role research plays in Walton’s strategy and how it is selected. The foundation has a list of about sixty reports and articles on its website that “are helping to inform” its approach to grantmaking (Walton Family Foundation 2018d). In the 2015 to 2020 strategic plan, Walton justifies its approach by citing a 2015 study it funded at the Center for Research on Education Outcomes (CREDO) at Stanford University, which analyzed 41 urban areas in 22 states over the course of five school years (2006/07 to 2011/12). The study found that “urban charter schools in the aggregate provide significantly higher levels of annual growth in both math and reading compared to their TPS [Traditional Public School] peers” (CREDO 2015: 17). However, the results of this study are disputed, as are the merits of previous CREDO reports. For instance, the National Education Policy Center (NEPC) found “significant reasons to exercise caution” due to the unconventional research methods that “might not adequately control for differences between families who select a charter school and those who do not.”5 Moreover, NEPC analyzed three of the major CREDO studies from 2009 to 2013 as part of its Think Tank Review Project, concluding that “The primary findings of the CREDO report show that charter school students’ test performance is basically the same as the performance of students enrolled in traditional public schools” (National Education Policy Center 2009). It is evident that the results of these studies are contested. However, the Walton Foundation has not brought this debate to life. Given the contested nature of charter schools, what incentives or disincentives might the foundation have to consider some of the more critical viewpoints in its strategy? Although Walton stresses the importance of research, the director of the foundation claims that the foundation does not take a very academic or theoretical approach to its work. Instead, he says that the Walton family draws from its own experiences and interactions with grantees (Aspen Institute 2017). This point is

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substantiated by the fact that Walton has chosen to use its three proof point cities as evidence for its theory of change. This is problematic in that 1) the success of charter schools is context-specific, and 2) it suggests that WFF may not be critically engaging with the body of research on charter schools. It appears that satisficing has taken place, whereby research is used to justify its theory of change ex post rather than informing it ex ante. To make better sense of this, it is useful to consider some of the literature that paints a less rosy picture of charter schools. For instance, a Fordham University study found that 72% of low-performing charters remained in operation and remained low performing over five years, and the charter schools that do perform well very much depend on their ability to send low-performing students back to public schools (Aspen Institute 2017). Several other studies refute the merits of “pay for performance,” which is promoted by the foundation. A 2010 Vanderbilt University study demonstrated that merit pay for teachers does not produce higher test scores for students ( Springer et al. 2010), and the National Research Council confirmed that standardized test scores do not measure student learning adequately (2011). While these are only a few examples that merit further exploration, they are cited only to demonstrate that the foundation has tended to be more responsive to the positive research on charter schools. Major international studies on education are conducted every five years. Two of these, the Progress in International Reading Literacy Study and the Trends in International Math and Science Study, examine the factors that contribute to school performance. According to these studies, the most significant indicator was poverty (measured by the percent of students in the school eligible for free or reduced-price lunch). Results from 2011 found that [i]n comparison to the US national average score, 4th-graders in schools in very low to moderate poverty (from less than 10 percent to almost 50 percent of students eligible for free or reduced-price lunch) scored higher, on average, while those in schools with higher proportions of poverty (50 percent to 75 percent or more of students eligible for free or reduced-price lunch) scored lower, on average. ( U.S. Department of Education 2012) This suggests that the most meaningful predictor of performance is socioeconomic status. Even so, the foundation continues to treat school choice as the best remedy for low-income families. Rather than address the underlying structural issues associated with low-performance, the foundation takes poverty as a given that can be overcome with the help of charter schools.

Design and implementation The foundation has supported charter schools in three phases, or “strategic plans.” The first two lasted about a decade each, and a third began with the “Building Equity Initiative” in 2015.

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During the first phase, starting in the mind-1990s, the goal was to get more charter schools up and running throughout the US. According to the former director of the K–12 Education Program (previously known as the Charter School Initiative), the foundation was “trying to get behind as many high-quality charters as [it] could” (Lund et al. 2003). Grantmaking was focused on start-up grants for individual schools in charter-friendly states. However, the support system of charter schools was not big enough to increase, let alone sustain, reform efforts against the rising pressures of opposition groups. For this reason, the foundation began to think more strategically and focused on building-out networks of school reform. In the second phase, starting in the mid-2000s, Walton focused on building the capacity of organizations that support charter schools. It did so in the form of operating grants for research and media relations, by supporting national organizations that assist charter school advocates, and by helping finance the infrastructure. During this time, legislators had come under increasing pressure by communities to limit and control the growth of charter schools (Lund et al. 2003). Hence, after providing direct support to charters, Walton opted for indirect funding via support organizations and adjusted its approach to accommodate a worsening political climate. Now in what we consider a third phase, the foundation has moved away from charter-unfriendly states and doubled-down on efforts in the most promising cities. Walton’s 2020 K–12 education strategic plan says, “The foundation is supporting work in cities where there are conditions supporting system wide educational improvement and where the foundation can have the greatest impact” (Walton Family Foundation 2016a: 5). All cities in which Walton works, apart from Memphis, were ranked in the top 20 of “America’s best cities for school choice” in 2015, and Memphis is considered to have a high potential for growth (Wohlstetter et al. 2015).

Performance measures As discussed in Chapter 2, performance measures are most difficult for innovative foundations because they can only be applied after a considerable period of time. This means that new grantmaking strategies supporting innovative charter school models are exploratory and have a higher risk of failing (as the case of Walton’s investments in virtual charter schools, discussed in the next section, demonstrates). According to Marc Holley, director of the Evaluation Unit, WFF employs the principles of strategic grantmaking in its evaluations (Holley and Carr 2014). This means that it makes sure the following points are in place: 1 2 3 4 5

An overall evaluation framework A grant performance measurement process A process for grantees to report performance to the foundation A process for disseminating evidence/results within foundations A process for incorporating evidence/results into future grant decisions and strategic planning

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The evaluation framework that Walton employs draws from the approaches used at other leading foundations, including the Kellogg Foundation, the Bill and Melinda Gates Foundation, the Hewlett Foundation, the Packard Foundation, and the Annie E. Casey Foundation. In practical terms, this means that WFF takes a hierarchical approach to evaluating each of its programs, which are divided into three focus areas – individual grants, strategies, and initiatives. For example, in its K–12 Education Program, each grantee is required to report on outputs and outcomes; grantees establish their own performance measures at the beginning of the grant, with Walton’s approval, after which they report on their progress. To this end, Walton provides a brief guide for education reform grant applicants to assist both program officers and grantees in developing good performance measures. When a grant has ended, the grantee’s performance is summarized and measured against key metrics. In terms of evaluating its overall education strategy, the foundation uses various indicators, such as those provided by the National Alliance for Public Charter Schools, to track progress made on charter school laws in all US states. To examine the impact of its initiative on student performance, it evaluates student performance, for example via changes in state-reported graduation rates. When quantitative evaluations are not possible, the foundation uses qualitative measures instead.

Course adjustments Over the years, the foundation has come to learn that the mere existence of quality charter schools in communities is not enough to improve overall student achievement. Its strategic plan for 2015 to 2020 admits that “schools of choice cannot stimulate systemic transformation and large-scale improvements on their own” (Walton Family Foundation 2016a: 4). As a result, the foundation is aiming to build stronger support for communities. However, one major criticism is that the foundation fails to address the negative externalities of charter schools on public schools and on social justice. Walton also learned that some of its more innovative investments were failing. For example, Walton invested $550,000 in virtual charter schools, which collectively constitute the ninth biggest “school district” in the US. Thanks to studies Walton commissioned at CREDO, CRPE, and Mathematica Policy Research, it was found that on average, these schools had a negative impact on achievement; students were nearly a full school year behind on math and nearly half a year behind on reading. In response, Marc Sternberg and Marc Holley write that they will ask more rigorous questions of online charter operators when considering proposals and urge policymakers to do so as well. Source: https://www.edweek.org/ew/ articles/2016/01/27/walton-family-foundation-we-must-rethink-online.html

Outcome and impact In 2014, the Foundation provided start-up and expansion grants to charter, district, and private schools (Walton Family Foundation 2015). According to Marc

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Sternberg, director of K–12 education reform, Walton has given grants to one in every four charter start-ups in the country, totaling $335 million. As one of the largest private contributors to education, Walton has been able to exert considerable influence on education policy in districts throughout the country. Moreover, the majority of teachers in these schools are alumni of Teach for America, of which Walton is one of the largest philanthropic investors. A critical New York Times article says of Walton, “With its many tentacles, it has helped fuel some of the fastest growing, and most divisive, trends in public education – including teacher evaluations based on student test scores and publicly funded vouchers for students to attend private schools” (Rich 2014). When it comes to the overall impact of Walton’s K–12 Education Program, it has been an undeniable agent of change, particularly in the cities where it is most active. The Walton Foundation has helped open thousands of charter schools since 1996 thanks to direct (e.g., start-up grants) and indirect funding (e.g., support organizations) (Lund et al. 2003). Given the sheer size of its investment – $1 billion over five years – the foundation’s grant support for school choice organization is “in itself sufficient to capitalize an effective public policy movement” ( Cohen 2007: 14). If the foundation were to be evaluated based solely on outputs, then its grantmaking would be a resounding success. However, the foundation merely considers charter schools as a means to an end and holds each charter school, or network of schools, accountable to strict performance indicators. Evaluation is an important part of the foundation’s grantmaking strategy, and the foundation invests about $10 million annually in research ( Sternberg and Holley 2016). It has an evaluation unit with about 10 staff members that is housed in a separate department within Walton but works closely with the program staff on evaluating the foundation’s major grants. The department commissions research and makes sure that programs have access to resources they need to make informed decisions. The institutions Walton refers to most in its listing of research reports are CREDO, CRPE, Mathematica, and the Manhattan Institute (Walton Family Foundation 2018e). The foundation describes its evaluations as rooted in “the best available scientific practice and, except where prohibitive in cost or time, [using] widely accepted approaches and metrics” (Walton Family Foundation 2018e). Although it prioritizes the use of quantitative targets, it recognized that it is difficult to determine which targets to use when dealing with such large and complex systems. For this reason, it writes that “including qualitative measures at times will be unavoidable, and even desirable, as evaluators consider and integrate complex and disparate information” (Walton Family Foundation 2018e). In general, evaluative attention is commensurate with the size of the grant and complexity of the problem, meaning there is less of an attention on evaluation for the grants that are listed under “Special Programs” or that are considered too small for the resources required of evaluation. Although the foundation acknowledges that there are racial and socioeconomic opportunity gaps in education, it proposes to alleviate this problem by doubling down on efforts to expand school choice rather than address the role of poverty in

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school performance. It argues that the demand for charter schools far outweighs the supply, with hundreds of thousands of students on waiting lists for charter schools throughout the nation. The logic is that better quality schools will help lift students from low-income families and end the vicious cycle of poverty. But as we have seen, charter schools per se do not solve the fundamental problems of povertydriven achievement gaps. An assessment by Philamplify finds that although there are high-quality charter schools that provide meaningful benefits to families, charter schools “have not achieved far-reaching, sustainable, and equitable system wide improvements” ( Gulati-Partee 2015). They may provide an alternative route for a handful of students who are lucky enough to be picked from the lottery system but arguably leave some students worse off than before. What kind of performance measures could the foundation develop to include considerations of social justice and inequality in the communities in which it works?

The case of Washington, DC According to Marc Sternberg, “DC is a better place today than it was 10 years ago because of the reforms that have played out [t]here” (Rich 2014). Many of the schools Walton has supported in DC are managed by the nation’s largest network of charter schools, the “Knowledge Is Power Program,” which is Walton’s prototype for success. However, this success is also much disputed and is difficult to attribute. It is no coincidence that WFF has focused on Washington, DC, which has some of the most relaxed regulations on charter school laws. The nation’s capital is also unique in that it lacks full representation in Congress, which undermines the voice of community-based organizations and makes it easier for private interests to lobby for legislation without popular support (El-Amine and Glazer 2008: 54). This may have been a factor in DC’s evolution to an innovation lab for educational experimentation. When considering the broader political context of DC over the past two decades, its attractiveness for charter school investments becomes more apparent. Many reform initiatives were spearheaded by former DC Mayor Anthony Williams (1999–2007), who took office shortly after the city filed for bankruptcy. Under Williams’s tenure, DC experienced a wave of privatization, drastic cuts in social services, and sales of public property in an effort to attract new residents and businesses to the district. In response to DC’s bankruptcy, Congress voted to replace the superintendent and members of the locally elected board of education with a control board. This was overseen by an appointed emergency board of trustees and implemented by the Army Corps of Engineers. The regulations on charter schools were eased, and the Walton Family Foundation seized the opportunity to bring charter schools to the district. Within a span of 10 years (1996–2006), the number of charter schools in DC grew from 3 to 66, and the number of students enrolled in charters climbed

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from 300 to 19,600 (El-Amine and Glazer 2008: 56). This was over a decade ago, with enrolment in 2016 having more than doubled since 2006 to a total of about 41,500 (District of Columbia Public Charter School Board 2018). The long-term initiative to attract private investment to the city (including for charter schools) may have stimulated growth, but it also resulted in “the highest income inequality in the nation, the lowest life expectancy, and the highest percentage of charter schools per capita – until Hurricane Katrina washed away the public school system in New Orleans” (El-Amine and Glazer 2008: 57). The Walton Foundation continues to be an important influence on public education within the district. This is a good example of the ambiguity of failure and success.

Ambiguity and benign fallibility We have seen that the Walton Family Foundation works in a highly complex and dynamic environment. The governance of education is driven from the local, state, and national levels, is steered by various public and private stakeholders, and encompasses a host of social issues. Given the great variation of opportunities and constraints between states, the foundation has decided to focus on relatively stable environments (one might note that high-need cities like Chicago or Detroit are not part of their portfolio). In theory, the strategy of seeking out opportunities that maximize impact according to a theory of change is in line with the ideals of strategic philanthropy. But by exploring the issue in greater depth, we have revealed some of the tensions, conflicts, and uncertainties that underlie Walton’s approach. In the end, we are left with an unclear sense of how successful the program in fact is. This ambiguity relates to what we term benign fallibility, some examples of which we pointed out earlier. These are summarized below.

Principal-agent dilemmas As mentioned, the Walton family is not bound by a specific deed that acts as a “silent principal” for the foundation. The family members themselves are the strongest principals and pursue their interests freely, as is demonstrated by the 900 or so external projects they support. These projects are not guided by professional staff or organized around strategic goals and consequently do not receive any evaluative attention. In this case, the relationship between grantor and grantee is guided by personal or legacy interests and defined by a financial transaction. Given the lack of specific strategies and goals, the motives of the grantor and grantees are unclear and may lead to inefficiencies. In addition, neither the grantor nor grantee have any personal stake in their contractual relationship and are fairly insulated from risk (recall that trustees are not owners in the sense of shareholders but rather weak principals beholden to a silent deed or, in this case, a family legacy). The grant agreement is more of a unilateral transfer of resources than a fee-for-service contract, as discussed in Chapter 1. For this reason, these projects have a high risk of information asymmetry and moral hazard.

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In the case of K–12 education, the complicated landscape of stakeholders creates an unclear picture of principal-agent relationships. The foundation makes grants to both charter schools and the education management organizations (EMOs) managing them, which may have conflicting goals. At the same time, charter schools have overlapping and sometimes conflicting accountabilities to their communities, their authorizers, and, to varying degrees, the state. The WFF board, for its part, has an interest in spreading high-quality charter schools, but it carries no direct responsibility in terms of their management or their closing procedures. Moreover, program officers are not the beneficiaries of charter schools and only have limited oversight or responsibilities for schools after a grant has been approved (although charters are required to demonstrate that performance measures are in place). Thus, both the board and program officers only act as weak principals on behalf of the communities they serve and have an interest in reporting positive outcomes. As mentioned, principal-agent problems also exist between EMOs – especially those that are privately run – and charter schools. EMOs often act in ways that go against the interests of charter school boards; while the former seeks to cut expenses to maximize profits, the latter seek to ensure that all accountability measures are met to best serve students (Green et al. 2016: 783). Because of this misalignment of incentives, a situation may arise wherein EMOs attempt, for example, to minimize the number of students that are more expensive (e.g., because of severe disabilities) even though charter schools are required to abide by anti-discrimination laws. Similarly, EMOs have an incentive to charge high fees for rent and for their management services, which are paid for at least in part by the state. Indeed, there have been several high-profile cases of fraud and abuse in the management of charter schools. However, WFF has no personal stakes or responsibilities in terms of EMO compliance with regulatory regimes. Again, this opens the door to moral hazards. In cases where grantees were implicated in fraud or abuse, the biggest cost the foundation bears is to its reputation. What can the foundation do to mitigate some of these principal-agent dilemmas?

Grantmaking – the path of least resistance? The complexity of the issue has necessarily led Walton to make compromises, or satisfice, on which communities to work with. It has gone from a wide approach to reform to one that hones in on cities that are more conducive to change – one might say the path of least resistance. By focusing on less hostile environments, the foundation reduces the risk of failed grants and gains higher social returns on its investments. It can also experiment more readily with high risk innovative ideas. In a sense, it acts like a business without the bottom line or accountability to shareholders. As a force for innovative change, Walton wields the power to affect the lives of thousands, for better or for worse. At the same time, it lacks the incentives and resources to weigh other approaches or go for the toughest cases. Instead, it

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can fall back on its core principles that it more or less justifies by the research and cases it chooses to illustrate.

Theory of change – assumption driven? This takes us to the theory of change, which we mentioned is less of a theory than a mission grounded in core beliefs. Indeed, there are reasons to believe that its theory is rooted in a libertarian free-market ideology. Although it has made some course adjustment, it has also chosen to ignore some of the opposing signals. Although charter schools are mostly a bipartisan issue, the loudest critics tend to come from the political left (Rich 2014). But understandably, Walton primarily supports the people and organizations that share its ideology. For example, it disproportionately funds research from conservative and libertarian think tanks, like the Thomas B. Fordham Institute and the American Enterprise Institute for Public Policy Research (but has also given grants to more moderate organizations, like New Leaders for New Schools). As a result, the more critical research tends to be overshadowed, which undermines a well-rounded perspective on the costs and benefits of alternative schools.

Conflicting goals? The Walton Family Foundation has also been criticized for contradicting its own mission of “creating opportunity so individuals and communities can live better in today’s world.” By taking a long-term approach that seeks systemic changes, collateral damage is part of the process, whether intended or not. This gets at the heart of ambiguity for foundations, as they can positively influence the lives of some, while negatively impacting the lives of others. The charter school movement is a great example of this. The privilege of the foundation is that it can choose to ignore some of the negative externalities under the premise that it is supporting a greater cause. Furthermore, some of the worst-performing school districts are ignored in Walton’s effort to focus on cities that are “full of need and ready for change” (Walton Family Foundation 2018a). Some of the school districts the foundation supported had income levels well above the median household income, such as the Douglas County School District in Colorado. Source: https://www.nytimes. com/2014/04/26/us/a-walmart-fortune-spreading-charter-schools.html. Satisficing seems to have taken place, as the foundation had weak incentives to work in cities that demonstrated high need but a low potential for cooperation. Some have also pointed to the irony of WFF seeking to improve people’s lives in local communities, while the business-model of the related Walton Corporation relies heavily on outsourcing jobs, keeping wages low, providing limited benefits, and outbidding its competitors because of its size and reach. Although the Walton Family Foundation is separate from the Walton Corporation, its endowment originates from the fortunes of the late Sam Walton, who founded Walmart stores. Given that poverty is an important explanatory variable of low-performance in

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school, a focus on promoting living wages may have a bigger impact. However, this is a research question that the foundation has not explored.

Conclusion Our intention has not been to weigh the merits of Walton’s approach or to embark on a philosophical discussion on school reform. Rather, we point to the ambiguities inherent in this case and to the subjective nature of evaluations. From a social justice standpoint, Walton is failing students because of negative externalities on traditional public schools that exacerbate inequality; from a libertarian perspective, however, the foundation is making schools more accountable to the communities they serve by freeing them from bureaucratic control. The point is that the dual political and financial independence that the Walton Family Foundation enjoys has allowed it to choose which failures and negative externalities to accept, as long as it conveys a sense that overall, it is working toward its self-prescribed objectives.

Study questions 1) 2)

3) 4)

What does this case say about the interaction between private philanthropy and public policy? To what extent is Walton’s support of charter schools rooted in family legacy as opposed to a theory of change? How can this result in conflicting goals? Develop a causal model (“theory of change”) for the Walton foundation that addresses some of the weaknesses in Walton’s strategy. A new director has been hired for the K–12 education program; he or she is trying to convince the board to focus less on charter schools and more on developing policy recommendations to improve traditional public schools in underserved communities. If you were the director, what would you propose? How would you convince the board to stray from their strong family legacy?

References case 1 Aspen Institute. (2017, May 22). Foundation Presidents Roundtable Series with Kyle Peterson. Retrieved 15 February 2018, from www.aspeninstitute.org/events/foundation-presidentsroundtable-series-kyle-peterson/ Center for Research on Education Outcomes (CREDO). (2015). Urban Charter School Study: Report on 41 Regions. Stanford, CA: Stanford University. Retrieved from http://urbanchar ters.stanford.edu/download/Urban%20Charter%20School%20Study%20Report%20 on%2041%20Regions.pdf Cohen, R. (2007). Strategic Grantmaking: Foundations and the School Privatization Movement. Washington, DC: National Committee for Responsive Philanthropy (NCRP). Retrieved from www.issuelab.org/resources/2959/2959.pdf

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Cosgrove, J. (2002, December 2). Online Extra: Q&A with Wal-Mart Heir John Walton. Bloomberg.Com. Retrieved from www.bloomberg.com/news/articles/2002-12-01/ online-extra-q-and-a-with-wal-mart-heir-john-walton Daniels, A. (2016, February 29). 3rd Generation of Walton Family Makes Sharp Turn in Giving [Walton Family Foundation Blog]. Retrieved 15 February 2018, from https:// blog.waltonfamilyfoundation.org:443/2016/february/3rd-generation-of-waltonfamily-makes-sharp-turn-in-giving District of Columbia Public Charter School Board. (2018). Student Enrollment. Retrieved 15 February 2018, from www.dcpcsb.org/data/evaluating-student-enrollment/studentenrollment Dixon, J. (2014, December 14). Public Money for Schools Buys Private Property. Detroit Free Press. Retrieved from www.freep.com/story/news/local/michigan/2014/12/14/ charters-national-heritage-academies-tax-dollars-school-contents/20357559/ El-Amine, Z., & Glazer, L. (2008). ‘Evolution’ or Destruction? A Look at Washington, DC. In L. Dingerson, B. Miner, B. Peterson, & S. Walters (Eds.), Keeping the Promise? The Debate over Charter Schools (pp. 53–66). Milwaukee, WI: Rethinking Schools Ltd. Ertas, N., & Roch, C. H. (2014). Charter Schools, Equity, and Student Enrollments: The Role of For-Profit Educational Management Organizations. Education and Urban Society, 46 (5), 548–579. https://doi.org/10.1177/0013124512458118 Green, P., Baker, B. D., Oluwole, J., & Mead, J. (2016). Are We Heading toward a Charter School ‘Bubble’? Lessons from the Subprime Mortgage Crisis. University of Richmond Law Review, 50 (3), 783–808. Gulati-Partee, G. (2015). Walton Family Foundation: How Can This Market-Oriented Grantmaker Advance Community-Led Solutions for Greater Equity? Washington, DC: Philamplify; National Committee for Responsive Philanthropy. Retrieved from www.philamplify.org/ wp-content/uploads/2015/04/Philamplify_Walton_Family_Foundation-FullReport.pdf Holley, M., & Carr, M. J. (2014, March 7). The Role of Evaluation in Strategic Philanthropy. Retrieved 15 February 2018, from https://nonprofitquarterly.org/2014/03/07/ the-role-of-evaluation-in-strategic-philanthropy/ Lund, C. N., Hassel, B. C., & Smith, K. (2003, January/February). Charter Schools: Challenges and Opportunities. Philanthropy. Retrieved from www.philanthropyroundtable. org/topic/excellence_in_philanthropy/charter_schools_challenges_and_opportunities Manno, B. (2017, December 11). [Phone Interview]. National Association of Charter School Authorizers (NACSA). (2018). Principles & Standards. Retrieved 15 February 2018, from www.qualitycharters.org/for-authorizers/ principles-and-standards/ National Education Policy Center. (2009, June 24). High-Quality Charter School Report Confirms Past Research. Retrieved 15 February 2018, from http://nepc.colorado.edu/ newsletter/2009/06/high-quality-charter-school-report-confirms-past-research National Research Council. (2011). Incentives and Test-Based Accountability in Education. Washington, DC: National Academies Press. https://doi.org/10.17226/12521 PBS. (2004). Closing the Achievement Gap: Charter School FAQ. Retrieved 15 February 2018, from www.pbs.org/closingtheachievementgap/faq.html Rich, M. (2014, April 25). A Walmart Fortune, Spreading Charter Schools. The New York Times. Retrieved from www.nytimes.com/2014/04/26/us/a-walmart-fortune-spreadingcharter-schools.html Springer, M., Ballou, D., Hamilton, L., Le, V.-N., Lockwood, J. R., McCaffrey, D., . . . Stecher, B. (2010). Teacher Pay for Performance: Experimental Evidence from the Project on Incentives in Teaching. Nashville: National Center for Performance Incentives. Retrieved from https:// my.vanderbilt.edu/performanceincentives/files/2012/09/Full-Report-Teacher-Pay-for-

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Performance-Experimental-Evidence-from-the-Project-on-Incentives-in-Teaching20104.pdf Sternberg, M., & Holley, M. (2016, January 27). Walton Family Foundation: We Must Rethink Online Learning: Education Week. Education Week. Retrieved from www.edweek.org/ ew/articles/2016/01/27/walton-family-foundation-we-must-rethink-online.html U.S. Department of Education. (2012). Highlights From PIRLS 2011 Reading Achievement of U.S. Fourth-Grade Students in an International Context. Washington, DC: U.S. Department of Education. Retrieved from http://nces.ed.gov/pubs2013/2013010rev.pdf Walton Family Foundation. (2015). 2014 Annual Report. Retrieved from www.issuelab. org/resource/2014-annual-report-the-walton-family-foundation.html Walton Family Foundation. (2016a). 2020 K-12 Education Strategic Plan. Retrieved from www.waltonfamilyfoundation.org/~/media/documents/k12-strategic-plan-overview4222016.pdf?la=en&la=en Walton Family Foundation. (2016b). Our Contribution to the Charter Movement. Retrieved 15 February 2018, from www.waltonfamilyfoundation.org:443/our-impact/k12-education/ edfacts/25-years-of-public-charter-schools/contribution-to-charter-movement Walton Family Foundation. (2017). Walton Family Foundation 2016 Annual Report. Retrieved 15 February 2018, from https://2016annualreport.waltonfamilyfoundation. org:443/ Walton Family Foundation. (2018a). K-12 Education. Retrieved 15 February 2018, from www.waltonfamilyfoundation.org:443/our-impact/k12-education Walton Family Foundation. (2018b). Public Charter Startup Grants. Retrieved 15 February 2018, from www.waltonfamilyfoundation.org:443/grants/public-charter-startup-grants Walton Family Foundation. (2018c). Student Achievement Goals. Retrieved 15 February 2018, from www.waltonfamilyfoundation.org:443/grants/public-charter-startup-grants/ student-achievement-goals Walton Family Foundation. (2018d). Research. Retrieved 15 February 2018, from www. waltonfamilyfoundation.org:443/research Walton Family Foundation. (2018e). Strategy, Learning & Evaluation. Retrieved 15 February 2018, from www.waltonfamilyfoundation.org:443/our-impact/strategy-learningevaluation Wisdom, M. (2015). Investing in Change: The Walton Family Foundation Charts a New Course (Principles for Effective Education Grantmaking No. Case Study No. 12). Portland, OR: Grantmakers for Education. Wixom, M. A. (2018, January 23). 50-State Comparison: Charter School Policies. Retrieved 15 February 2018, from www.ecs.org/charter-school-policies/ Wohlstetter, P., Zeehandelaar Shaw, D., & Griffith, D. (2015). America’s Best and Worst Cities for School Choice. The Thomas B. Fordham Institute. Retrieved from https://edexcel lence.net/articles/americas-best-and-worst-cities-for-school-choice-embargoed-until1201-edt-on-december-9 Woodworth, J., Raymond, M., Chunping, H., Negassi, Y., Richardson, P., & Snow, W. (2017). Charter Management Organizations 2017. Stanford, CA: Center for Research on Education Outcomes (CREDO). Retrieved from https://credo.stanford.edu/pdfs/ CMO%20FINAL.pdf

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Case 2: King Baudouin Foundation, Belgium: the training of imams Overview of the case This case illustrates the way in which a foundation may use its independence and neutrality to work on highly sensitive, controversial issues in which politicians are reluctant to become involved. The issue and the key stakeholders had a medium to high complexity, and the environment was highly dynamic, though the project became increasingly complex and dynamic as it went on. The foundation’s style was largely collaborative, and its role was one of funder, convener, and strategist. The program’s focus and strategy adapted over time. The case is also an excellent example of nested problems. The starting point – integration of Muslims into Belgian society – revealed the need to look at the training of imams, which in turn highlighted a lack of knowledge about the training of leaders in other faiths, as well as complex divisions within the Muslim community, within government, and between the Muslim community and government.

The foundation The King Baudouin Foundation (KBF) was established in 1976 on the 25th anniversary of the accession to the throne of King Baudouin. Its aim is to promote a better society by supporting projects and citizens working to this end. Its key values are stated as justice, democracy, and respect for diversity. The foundation spends around €40 million each year from its own endowment, from the proceeds of the national lottery, and from gifts of individuals, associations, and businesses. Although the foundation is based in Brussels, it sees its role as covering Belgium, as well as wider European and international issues. The foundation combines a range of methods of working. It runs its own programs; it makes grants to others; it develops its own projects; it organizes round tables with experts and citizens, often with very different points of view; it stimulates and convenes discussion of current and future issues; it promotes and funds both action and research; and it disseminates the TABLE 3.2.1 The Training of Imams case in context

High Dynamism Low Dynamism Consensus as dominant style

High Complexity High Salience Issue or Problem

Low Complexity

High uncertainty The Training of Imams project: a case of medium complexity in a support and coordination scenario, with complexity and dynamism and some contestation over time

Medium uncertainty Low uncertainty

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results widely in free publications. There are currently eleven “activity domains,” consisting of poverty and social justice, health, European integration, democracy, civic engagement, philanthropy, heritage, Africa and developing countries, developing talent, sustainable development, and the German-speaking community. The domains dealing with poverty, democracy, and philanthropy are the largest, with about 20 staff members each. In addition, the “government relations” domain creates ties to the Flemish region and community, the Walloon region and Frenchspeaking community, the Brussels capital region, the federal government, and international governments.

Governance and management KBF is an independent foundation administered by a board of governors, under the honorary presidency of HM Queen Mathilde. It is both a grantmaking and an operating foundation. As such, it carries out many of its own charitable projects. The board consists of two vice chairmen, a managing director, and eight “governors.” Their responsibility is to set out the main lines of policy for the foundation. Members of the board have a four-year mandate and are elected by a two-thirds majority of the governors; the chair is appointed for a two-year term, which can be renewed twice. Consequently, there is a relatively high turnover rate. Decisions on the board are taken by a majority vote (KBF 2018). Each of the domains that KBF works on is headed by a director and supported by two to 20 staff members, including consultants. At the time of KBF’s work on imams, there was a domain that dealt specifically with migration and integration issues (KBF 2018). The Training of Imams was part of a larger project on Islam and Muslims in Belgium and in Europe, which was led by a program officer (PO). The PO at the time had a fair amount of autonomy in terms of building a steering committee and network that would make decisions on the future direction of the project ( Fontaine 2017). Today, the focus of the larger program is more on enhancing cohesion and building bridges within Europe.

Role of the foundation At the start of the project, the foundation tried to act as a bridge-builder between different religious groups, regions (Belgium, Flanders, and Wallonia), and local stakeholders. However, it soon realized that it was virtually impossible to develop a consensus within the Muslim community, let alone people with different migration backgrounds. Between the Moroccans, the Turks, the Balkan people, the Sunni, the Shia, the different regional distributions, and so on, there were simply too many interests to reconcile. However, KBF brought together what it felt was a well-rounded group of individuals to steer the project (le Groupe d’Accompagnement). Once the steering committee was established, KBF shifted to an agenda-setting role.

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Description of the specific program As noted, the Training of Imams was a project that was part of a larger program that focused on Islam and Muslims in Belgium and in Europe, which was launched by the King Baudouin Foundation (KBF) in 2003. The idea behind this initiative was to improve social cohesion among the various ethnic and religious groups living in Belgium. Under this broad heading, the board decided to focus on areas where they believed the foundation would have the greatest impact. Among these were schools and health, establishing a dialogue between Muslim and nonMuslim communities, and addressing the role of imams in Muslim communities. Given that imams often play an important leadership role within communities, the steering committee believed that a focus on this subgroup would have the potential to promote positive change within and between the various ethnic and religious subgroups residing in Belgium. There was little public knowledge of how imams were trained and how this training compared with clergy from other major religions. KBF was aware that, first, unlike many other religions, Islam has no defined hierarchical structure; second, imams often have influence beyond the confines of a mosque; finally, the role of imams varies depending on the particular religious school of thought. Given these factors, the first phase of the program focused on gathering basic information through an external steering committee.

Origins and rationale Initially, the idea to work on Islam and Muslims in Belgium came from the board and the management committee. This was the outcome of an accumulation of integration issues, and the foundation already had a program area dedicated to this topic. When it came to questions of integration, the PO recalls that the general public was primarily concerned about Muslims. The foundation therefore knew that if it wanted to make a meaningful contribution to the debate, it had to specifically address the issue of Muslim integration, or else it would be negating the issue and its work on the matter would not be taken very seriously by the public ( Fontaine 2017). The board decided to set up a project for 3–5 years with the aim of highlighting specific problems of social cohesion related to the growing population of Muslims living in Belgium. The mandate of the board was to 1) create a steering committee with 12 to 16 people; 2) to determine the major challenges in relations between Muslims and non-Muslims via surveys and conferences; and 3) to come up with recommendations. The same steering committee guided the project throughout its duration. Over the course of several rounds of discussion, the steering committee decided to begin by investigating the role of mosques and imams in Belgium and to what extent their roles might be inhibiting progress on integration (Fontaine 2017). Statistics on ethnicity or ethnic backgrounds have generally been taboo in Belgium since the end of the Second World War because of the potential risk this

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poses to minorities. The Socialist Party, which tends to be the party that people with a migration background support, was worried that statistics would lead to stigmatization of Belgians with different ethnic or religious backgrounds. However, KBF believed that without accurate statistics, clear policies were impossible ( Fontaine 2017). For this reason, it embarked on a fact-finding mission.

Political context When the program began in 2003, there were an estimated 350,000 Muslims living in Belgium, primarily of Moroccan and Turkish descent (Bureau of Democracy, Human Rights, and Labor 2004). This was about 4% of the population (and grew to 6% in 2017). While Catholics and Protestants had specific institutions and guidelines for the training of their clergy (e.g., seminary schools, faculties of theology), there was no clear training scheme for imams. Imams were often brought in from abroad. Where and how were imams trained, and did that training include knowledge of Belgian culture and laws? “Foreign” imams were one element in the fear of radicalization on the part of the media and others (Leat 2007: 71), along with a wider lack of understanding between Muslim and non-Muslim communities. These factors were important strands in the thinking behind the program. The primary goal behind another strand in KBF’s thinking concerned the way in which Islam was treated in Belgian society. After the attacks of 9/11, the political climate was already unfavorable to Muslims and rife with prejudice. Although Islam had been a recognized religion in Belgium since 1974, the local mosques and imams were still not publicly funded. Freedom of religion in Belgium is coupled with financial support from the state for recognized religions and beliefs (Roman Catholicism, Protestantism, Anglicanism, Orthodox Christianity, Judaism, Islam, and non-confessional humanism), and the government paid the salaries and pensions of the clergy from these religions (Article 181 of the constitution). State recognition brought additional privileges, such as free broadcasting time, subsidized housing and materials, and religious education in public schools (Loobuyck and Meier 2013: 170). Muslims were not only excluded from many of these benefits but were generally also experiencing a higher degree of discrimination. Although the Centre Interfédéral pour l’égalité des Chances (CECLR) had been charged with investigating discrimination based on race, little had actually been done. In 2002, CECLR received 1,316 complaints, of which only 17 were brought to court (Bureau of Democracy, Human Rights, and Labor 2004).

Specific goals But issues of discrimination did not in fact play a role in KBF’s decision to focus on mosques and imams; neither did a fear of radicalization. Rather, it was the integration issues of day-to-day life with which the project was concerned. For many people, living together had not been easy because of the cultural difference between liberal Western society and non-Christian religious groups, of which

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Muslims were the largest. The foundation had grown aware of particular issues of integration at the time, for example with regard to the veil and medical examinations (Fontaine 2017). Although the foundation acknowledged the problems of discrimination, the foundation explicitly decided not to focus on this because many actors were in this field already. Instead, it wanted to work on something that nobody else had investigated. Perhaps against the grain of the Walloon government, KBF wanted to take a balanced approach to the issue, prioritizing reciprocity – integration was about give and take between Muslims and non-Muslims. The discussions at the foundation emphasized not only the rights of Muslims but also their duties (Fontaine 2017). Therefore, the goal was not to spark a theoretical discussion on principles of integration that would result in a long report but to take a pragmatic approach that would put the topic on the political agenda, reveal specific problems, and listen to as many actors as possible in an effort to draft recommendations that would be relevant for politicians. Given the novelty of the data KBF sought, it knew that this was very likely to be picked up by media, which was key to getting the issue onto the political agenda. This in turn would force politicians to respond, even though it did not guarantee that they would act upon any of the recommendations. In some cases, KBF had learned that it was best for government not to intervene. For example, the program met with many professionals in the health sector who felt that hospitals needed to come up with their own solutions to handling sensitive religious issues and that a uniform regulation on this would be counterproductive. So on some issues, the goal was for government not to respond. Either way, the media would play an instrumental role in communicating this.

A divided federal system Part of what mobilized KBF around this issue was the lack of a cohesive policy on integration in Belgium. Several factors contributed to this situation. Attempts by the government to arrive at a solution to the lack of public funding for mosques were stymied by the divisions between Flanders and Wallonia and compounded by a fragmented Muslim community. For a long time, Belgium was slow to implement reforms because of a lack of both political incentives and a representative Muslim body (Loobuyck and Meier 2013: 170). The enforcement of anti-discrimination laws is particularly challenging in Belgium, in which the jurisdiction between the region, local, and national levels is not clearly delineated (Anti-Discrimination Law in Belgium 2013). A state reform in 2002 that decentralized the recognition of religious communities gave this jurisdiction to the regions – Brussels, Flanders, and Wallonia. Each had its own approach to implementing recognition of Islam, and the localization of decisions enabled the federal government to avoid the issue (Loobuyck and Meier 2013: 171). For example, Flanders has a mandatory civic integration program with specific benchmarks in terms of language skills, civic education, cultural adaptation, and so on. However, Wallonia has avoided this,

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again due to the risk of political stigmatization of migrants. This contributed to a fragmented and slow process. For instance, the first school inspectors of Islamic religious education were only appointed in 2005, the Belgian government did not fund imams until 2007, and Islamic television and radio programming did not begin until 2011 (Kortmann and Rosenow-Williams 2013). In terms of the KBF, an implicit goal seemed to be for Wallonia to adopt specific integration benchmarks that would help move the process along. The PO did not feel that integration in Flanders had necessarily been more successful, since there was a sense that the Flemish-speaking communities were more prejudiced against migrants; however, Flanders was thought to be better at naming the problems so there could be a public debate about them. Wallonia tended to deny the problems, even though KBF had conducted a survey within migrant communities that advocated for better integration policies. In 2014, however, Wallonia began taking measures to introduce its own civic integration program, but many of its components did not become compulsory until 2016 (European Commission 2016).

Divisions within the Muslim community Belgium’s federal system was one barrier to progress, but another was the Muslim community’s difficulties in forming a united representative body. To benefit from public funds, religions are required to have an official representative council, but forming such a body was difficult for a religion with no hierarchical structure and a very diverse group of followers (Loobuyck and Meier 2013: 171–172). The Islamic Cultural Center (ICC) became the de facto interlocutor with government, but it was not considered to be representative of the local Muslim community, as it was run by the Gulf Arab States (Husson 2007: 14). The government’s expectation that different Islamic sects would unite under one representative body only highlighted the lack of understanding about the religion and its followers in Belgium. This was the context for KBF’s decision to undertake the program and to begin by collecting data on the role of imams, the knowledge and skills they needed, and how their training could be supported at the local level. In order to provide cross-national and inter-religious comparisons, the foundation gathered data on the training of leaders in other religious congregations in Belgium and in other European states. KBF believed that it could play a unique role in this area; it knew that it had the necessary reputational capital as well as a network to unite stakeholders from within Flanders and Wallonia. KBF also had the independence to serve as a neutral platform for deliberation on this highly political and sensitive subject of which many politicians were wary.

Design and implementation KBF’s initial priority was to involve all the stakeholders in a fact-finding mission. As a first step, KBF created a steering committee that included leaders from

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business, academia, religious groups, and the public and nonprofit sectors. It was essential to include the views of leaders from Muslim communities as well, and these were selected by the program officer (PO) at the time. This allowed the foundation to gather detailed information without imposing its own perceptions and priorities, acting as a neutral convener to inform policy decisions. One of the most difficult tasks in this process was deciding which religious leaders to involve and with whom to partner from the Muslim community. Given the differences and divisions between many followers of the Islamic faith, it was important to find leaders who were open to cooperation. The PO was not fully aware of all the various groups, but his naïveté was beneficial in the sense that it brought opposing voices and unexpected groupings to the table. In the end, the foundation used a process of trial and error that allowed for enough flexibility to make adjustments. The PO came up with a final list for the steering committee, which was chaired by a well-respected, retired senior diplomat. The steering committee’s responsibility was to identify and prioritize issues around Muslim inclusion within Belgian society and, most importantly, to advise KBF on the role it could play. The committee issued a report with recommendations, which received considerable media coverage. The report underscored the lack of information about Islam. How many mosques are there in Belgium, and where are they located? What are the dominant schools of thought, and where do their imams come from? How are imams trained, and do they receive any training at all? The topic of religious leadership in Islam was already highly contested in Belgium, and the government immediately distanced itself from the search for answers to these questions. KBF took on that responsibility. Following the committee’s recommendation, KBF commissioned research from two sociologists from the Université libre de Bruxelles (ULB) and the University of Ghent. The research objective was to take stock of the current situation in the three regions of the country, to determine priority issues to be resolved, and to highlight existing initiatives, including those in neighboring countries (El Battiui and Kanmaz 2004). The research report Mosquees, imams, et professeurs de religion Islamique (Mosques, imams, and professors of the Islamic religion) was published in 2004 and was the first survey of its kind in Belgium (Husson 2007: 14). The publication made note of the important difference within Islam and the different roles of mosques, noting that this knowledge was critical to understanding how local Muslim communities function (El Battiui and Kanmaz 2004). The research report sparked considerable interest, including from the European Union. Following a roundtable organized by the European Parliament, the foundation published a further report titled The case for training imams in Belgium: reference points in Belgium and Europe (Husson 2007: 5). Now there was an additional question: what type of training did imams need and how did this compare to the training of other religious clergy? It was clear that more information was required if the report was to inform public policies. KBF commissioned a report from JeanFrancois Husson, a highly respected academic who had in-depth knowledge of

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the relationship between organized religion and the state. His report The Training of Imams in Europe: The Current State was published in 2007 and summarized how leaders of other religions and recognized cults are trained in Belgium, France, the Netherlands, England, Germany, and Sweden. The King Baudouin Foundation was the primary funder of this project; at a later stage, the Belgian government co-funded parts of the report.

Toeing the political line In spite of the interest taken by the European Union, KBF was not involved with the development of any political programs. KBF firmly believed that it was the responsibility of government to make policy decisions (Fontaine 2017). In the case of Muslim integration in Belgium, KBF was there to inform the background, to set the agenda, to advise, and to make recommendations. But it kept a clear divide between informing political decisions and making political decisions on behalf of the government, as it had already learned this was dangerous territory. For example, upon the request of the Minister of Education, KBF used to coach students in twelve schools that the state had trouble working with, for various reasons. In the end, the foundation was perceived as part of the administration, or as agents of the minister.

Major challenges One challenge of bringing different people from the Muslim community together was that the people the foundation chose to work with were not necessarily representative of a larger community. The PO recalls that in some cases, it was difficult to distinguish between individuals who were among the loudest within the community and those who had the interest of the wider community in mind. Some of the people KBF invited turned out to be quite controversial, not ones with whom the government would have opted to work. KBF initially tried to build a body that would be more or less representative of the Muslim community in Belgium, but with time, it learned that this was virtually impossible. The government had previously attempted to organize a body representing Muslims of Belgium for non-religious issues in order to have a spokesperson, similar to bishops of the Catholic Church. This failed due, in large part, to the national and religious divisions within Islam, as well as major disagreements about who should chair the body. The government had hoped that focusing on non-religious issues would be a way of avoiding religious differences within Islam but had not realized the extent to which the line between religious and non-religious issues was blurred. Another challenge was knowing the right time to make recommendations to politicians: “In terms of effort, sometimes we are too early, which merits followups with new governments. That is always a challenge, to keep up with an issue or topic even if the project is no longer ongoing” (Fontaine 2017).

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Exit strategy After 2007, the foundation continued working on the issue in an advisory capacity. When there were federal elections in Belgium in 2007, the foundation wrote a memo that gathered all the recommendations it had pertaining to its work on the Training of Imams and shared it with all the political parties. That is how the foundation tracked what was going on in government. In hindsight, however, the PO suggests that they could have gone further with their work. The integration issue continues to be extremely pertinent, especially in light of Belgium’s recent reputation for harboring a high number of Muslims susceptible to radicalization. In a digital age, there is a question about the extent to which a program that focuses on imams alone can effectively counter radicalization. The public policy issue at hand may rather be the broader picture of Muslim integration in Western Europe. Compared to other groups, Muslim communities in Europe are often more marginalized, both socially and economically, and more homogenous and isolated by country of origin, thus hampering integration. While the King Baudouin Foundation laid the groundwork for more imams to be trained in Europe, the work of building bridges between disconnected communities is far from finished.

Outcome and impact Although KBF did not succeed at building coalitions, it did manage to bring media and political attention to the issue. The PO suggests that the biggest accomplishments of the project were agenda-setting, an increased awareness of the issues, and a sense of urgency for dealing with the problem. However, the foundation did not have any tangible measures for evaluation, such as determining how many imams coming from abroad started receiving training in Belgium. Evaluation was never a priority for this program. Even if one were to examine the state of

TABLE 3.2.2 Time line of KBF’s Training of Imams project

2003

2004

2006

2006

2007

KBF convenes an advisory committee of religious leaders, academics, business people, public sector representatives, the media, and nonprofit bodies concerned with race and religion, which agrees to focus on mosques and imams. Roundtables and KBF commissions its first report on mosques, imams, and Islamic religion teachers in Belgium: “Mosquées, imams et professeurs de religion islamique,” which is subsequently discussed in two roundtables. Publication of first report by Jean Francois Husson: “Pour une formation des imams en Belgique: Points de référence en Belgique et en Europe,” which gained considerable attention, also from the EU. The first Husson report is presented at a roundtable organized by the European Parliament, which prompts KBF to commission a second report by Jean-François Husson. KBF publishes Husson’s second report, Training imams in Europe: the current status

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integration in terms of imam training today, it would be impossible to attribute any of these advances to KBF’s work ( Fontaine 2017). But given the wide attention paid to the reports, the research KBF published did succeed in informing some of the subsequent developments highlighted here.

Follow-up research initiatives Various initiatives came from the roundtable discussions hosted by KBF, in addition to the subsequent research reports. For instance, a representative from the office of the Minister for Schools and Higher Education for the French-speaking community persuaded the minister to co-finance an additional small project focused on identifying existing Muslim education centers and programs. Following on from this, the University of Louvain received a small grant to host a training session for Islamic leaders. However, this became a point of contention with one of the Muslim bodies, which was running its own program and for which it was seeking recognition and financial support. Moreover, the minister of the Flemishspeaking community supported a different approach, in which the first step was for the Muslim community to define its own training needs and requirements (Leat 2007).

Policy changes In spite of these initial disagreements, the issues gained traction in the following years. In 2005, the Belgian Minister of Justice relied on research funded by KBF for an initiative to harmonize the existing division of funding quotas, which prompted the Muslim community to come forward with its own proposals. The following year, KBF gave a presentation to the European Parliament and organized a seminar for EU decision-makers together with the European Policy Centre (2005). The European Commission and Parliament took a particular interest in this issue on a European scale. This inspired KBF to commission the report that was published in 2007 on the training of imams in Europe ( Husson 2007). The Europe-wide report revealed important findings that were relevant to making informed policy decisions. For instance, it discovered that all religions had a proportion of foreign ministers or leaders, meaning that Islam was not unusual in this regard. It also identified two key elements for the training of religious leaders: theological knowledge, on the one hand, and knowledge of the language, culture, and society, on the other. Another important finding in the report was that whereas other religions clearly define the roles and processes of becoming ministers or leaders, Islam has no formal rules, making it more difficult to define authority and knowledge. The report ended with possible options for ways in which Imam training might be organized in Belgium, all of which emphasized the necessity to gain the support of local Muslim leaders ( KBF 2005: 4).

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An increased awareness By 2007, the program had achieved results at various levels. Information was available for the training of imams in Belgium and other countries. The communication between key stakeholders from the Muslim community, education, and government improved, the issue gained political salience. Internationally, there was also a stronger interest in developing training programs for Imams that were recognized (Leat 2007: 71). By the end of 2007, the Walloon and Flemish governments had recognized the first mosques in which one or two imams were paid. That same year, Belgium passed an Anti-Discrimination Act outlawing discrimination based on religion, though it is unclear to what extent this is related to KBF’s work.

Ambiguity and benign fallibility Amateurism and information asymmetries As mentioned, there was a degree of naïveté on behalf of the PO regarding the divisions not only between the different branches of Islam but also within faith communities. This situation might best be explained by the “hiding hand principle,” in which a person (or in this case a foundation) chooses to engage in a project partially because the extent of its complexities are not fully understood (Hirschman 1967). There was a general lack of understanding of the role of imams and the line between religion and culture in Islam. Even the government had miscalculated the degree to which culture was separable from religion in its attempt to create a representative body for non-religious affairs. Since the Muslims who were invited to attend KBF’s roundtable discussions were not necessarily representative of a wider community, there were information asymmetries that inhibited the foundation’s ability to pick up signals that may have been pertinent to its work. How can amateurism or a lack of awareness about the complexity of an issue be both an advantage and a disadvantage?

Principle-agent problems Balancing persistence, reputation, and political engagement This case raises some interesting issues related to the principle-agent problem of foundations. For instance, KBF’s board did not have a strong incentive to pursue the project further, even if the complexity of the issue may have merited a longer-term commitment. There was a sense that after about five years, not much could be gained in terms of publicity and that the goal of putting the issue on the political agenda had more or less been achieved ( Fontaine 2017). As

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such, there was greater interest in exploring the pipeline of new and interesting projects that would continue to attract the attention of the media and public. In addition, the foundation did not want to engage more deeply with the politics of the issue. At what point can an investment be considered sufficient? Were there any missed opportunities to go beyond putting the issue on the political agenda? While these questions are difficult to answer, they may not have factored in the cost-benefit analyses of the board. Broadly speaking, board members are selected not only based on their knowledge of an issue but also on account of their business acumen, access to important networks, or prestige. It is virtually impossible for members to be invested in all the diverse issues that their foundations work on. For this reason, boards rely on the expertise and persuasiveness of staff to make informed decisions. But even if a director makes a convincing case to continue a project, the board may settle for outcomes that were “more or less successful,” especially if something more interesting is on the horizon (as in RWJF’s decision to pursue childhood obesity instead of continuing with tobacco). In this regard, foundations do not behave all that differently from opportunistic business investors. Does this incentive structure prevent foundations from taking full advantage of their dual-independence, undermining their propensity to be creative or take risks? Winners and losers of a risk-averse approach In addition to safeguarding the foundation’s reputation, board members also have legal and personal incentives to be cautious of risk. How far a project ventures into politically contested territory is the foundation’s prerogative; some are more inclined to dive headlong into the politics of an issue than others, as can be seen in the Pew and RWJF cases. KBF drew a clear line for its work on Muslims and Islam, and the board did not have an incentive to cross into dangerous political territory even if this would have helped maintain political salience. In other words, it opted to be more of a catalyst than a forerunner of change. When it comes to the Training of Imams project, the risk was calculated. For the first time in Belgium’s history, a group was willing to invest in a survey that revealed the ethnic, sectoral, and national ties of all mosques in Belgium. The foundation knew that there was a large public interest in this information, but it stopped short of sitting at the negotiating table with government. It knew that in some cases, such as for health professionals in hospitals, government intervention was not desired. Did KBF’s reluctance to address controversial issues of discrimination favor the status quo, and whom did this benefit?

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Who are the beneficiaries? A discussion on principal-agent problems merits an examination of who the main principals and agents were. Was KBF’s quest for information a boon for government, as it did not have to engage in a controversial fact-finding mission of its own? Or might this have benefited the concerned citizens of Wallonia who wanted their government to impose stricter integration measures, similar to Flanders? Or the Muslim communities that were often misrepresented and poorly understood, for example, by teachers and health professionals? According to the PO, there was not a specific group whose interests the foundation had in mind since it took a pragmatic approach that meant both sides should meet in the middle. Although the reports KBF published speak of a “Muslim community,” this term was a misnomer because it assumed similar interests among the people who subscribed to the Islamic faith. In reality, of course, there were too many subgroups within this community to determine what policy approach worked best for different communities. Even if KBF sought a balanced and pragmatic approach founded on compromise, it did not have a clear picture of who these groups were. To what extent can there be effective recommendations and policies if it is unclear for whom they are designed? Is there a positive role for ambiguity here?

Persistence, adequacy, and timing Beyond issues of misaligned incentives, there were several other barriers to KBF’s persistence with its project on Islam and Muslims in Belgium and Europe. First, a prolonged commitment would have required goals beyond putting the issue on the political agenda. Eventually, the foundation would have needed to outline specific changes that would have been difficult to achieve without lobbying the government, which the foundation explicitly avoided. It also would have had to follow up on the recommendations it outlined and report on its results. By taking a short-term approach, KBF could remain in a phase of data-seeking, agenda-setting, and information sharing. Second, convincing the board to re-invest in a project may have required demonstrable results. An initial investment can serve to test an idea or gather information. Over time, however, results need to be assessed for a project to reach new and interesting dimensions. This creates a dilemma because it is often too early to speak about results. Third, working on the same topic over the long term is difficult in terms of communication. In order to put an issue on the agenda, it is necessary to gain the attention of the media. However, the mainstream media tends to have a short attention span and moves on quickly to the next big attention-grabbing issue.

Conclusion This case illustrates how a foundation may use its independence and neutrality to work on highly sensitive, controversial issues in which politicians are reluctant

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to become involved. At the same time, it highlights how amateurism, principalagent problems, and timing issues can play out for good or ill in practice. We have seen that even though foundations are in a unique position to work on long-term issues (unlike like governments with fixed terms), at times, this is challenging because of political constraints within the foundation. A deed may serve as a silent principal that guides trustees toward a general (and in some cases specific) purpose, but the interests of leaders and board members also evolve. This contributes to the phenomenon of projects that stop short of achieving quantifiable impact. That is not to say that there is no value in agenda-setting and raising awareness, as KBF did. Thanks to its neutrality and independence, the foundation brought conflicting voices to one table and unraveled some of the intricacies of a nested societal problem, albeit with weak ties to concrete results.

Study questions 1)

2)

3)

If you were the program officer for the project on Muslims and Islam in Belgium and Europe, how would you have tried to convince the board to further invest in this issue? KBF did not want to risk going beyond setting the agenda, although it ultimately hoped for legislative changes. Discuss the short and longerterm advantages and disadvantages of this approach. Hirschman (1967) writes: “[S]ince we necessarily underestimate our creativity, it is desirable that we underestimate to a roughly similar extent the difficulties of the task we face, so as to be tricked by these two offsetting into undertaking tasks which we can, but otherwise would not dare, tackle.” To what extent do you agree or disagree with this statement? Justify your answer with examples from the KBF case.

References case 2 Anti-Discrimination Law in Belgium: Legal Memorandum. (2013, January). Retrieved from http://adapt.it/adapt-indice-a-z/wp-content/uploads/2014/04/discrimination_bel gium_2013.pdf Bureau of Democracy, Human Rights, and Labor. (2004, February 25). Belgium: Country Reports on Human Rights Practices. Retrieved 21 February 2018, from www.state. gov/j/drl/rls/hrrpt/2003/27828.htm El Battiui, M., & Kanmaz, M. (2004). Mosquées, imams et professeurs de religion islamique en Belgique. État de la question et enjeux. Brussels: King Baudouin Foundation. Retrieved from www.arcre.org/wp-content/uploads/2012/12/PUB_1448_Mosquees_imams_prof_ islam.pdf European Commission. (2016, March 10). Belgium: Wallonia Will Have a Mandatory Integration Programme Too. Retrieved 21 February 2018, from https://ec.europa.eu/ migrant-integration/news/belgium-wallonia-will-have-a-mandatory-integrationprogramme-too

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European Policy Center (EPC). (2005, July 8). The Status of Imams in Europe. Retrieved 1 March 2018, from www.epc.eu/events_rep_details.php?pub_id=656&cat_id=6 Fontaine, B. (2017, December 21). [Phone Interview]. King Baudouin Foundation, Brussels. Hirschman, A. O. (1967). The Principle of the Hiding Hand. The Public Interest, 6, 10–23. Husson, J.-F. (2007). Training Imams in Europe: The Current Status. Brussels: King Baudouin Foundation. Retrieved from https://orbi.uliege.be/bitstream/2268/90149/1/PUB_1694_ TrainingImamsEurope%20%28Husson%202007%29.pdf King Baudouin Foundation. (2005). Newsletter Autumn/Winter, Brussels. King Baudouin Foundation. (2018). Board of Governors. Retrieved 21 February 2018, from https://en/About-us/Who-we-are/Board-of-Governors Kortmann, M., & Rosenow-Williams, K. (2013). Islamic Organizations in Europe and the USA: A Multidisciplinary Perspective. Houndmills; Basingstoke; Hampshire: Palgrave Macmillan. Leat, D. (2007). Just Change: Strategies for Increasing Philanthropic Impact. London: The Woburn Place Collaborative. Loobuyck, P., & Meier, P. (2013). Imams in Flanders, Belgium: Toward the First Flemish Imams. In M. Kortmann & K. Rosenow-Williams (Eds.), Islamic Organizations in Europe and the USA, a Multidisciplinary Perspective (pp. 169–185). New York, NY: Palgrave Macmillan.

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Case 3: Pew Charitable Trusts, US: global warming and climate change program Overview of the case This is a case combining high complexity in terms of the organizational task environment and the heterogeneity of demands and expectations, a very dynamic environment, and high salience. It illustrates the complex interaction between the work of a foundation and the changing policy environment around a poorly understood and easily politicized issue. At different times, the foundation focused on collaboration and contestation and challenge and was not afraid to adapt its strategy in light of changes in the wider political, social, and economic environment. Its role also varied over time as it created a separate organization that became independent of the foundation but still largely funded by it in the beginning. Benign fallibility comes into play in terms of satisficing on federal legislation defunding climate change as a result of governance changes. However, the foundation used its dual independence to mobilize considerable resources to energy efficiency and renewables – areas that had been largely cut from the federal budget – to create two lasting institutions from its work: the Energy Foundation and the Center for Climate Change and Energy Solutions.

The foundation The Pew Charitable Trusts (PCT) is a global non-governmental organization (formerly a private foundation) that was established through the consolidation of seven individual family trusts, created by the children of Sun Oil Company founder, Joseph N. Pew, and his wife, Mary Anderson Pew. The founder’s wish was to leave behind a legacy that would support “research, practical knowledge and a robust democracy” (Pew Charitable Trusts 2018). Today, PCT has added to its founder’s interests by including research on public opinion; support for culture and the arts; health, state, and consumer policy initiatives; and, finally, the environment. Today, PCT is focused on the following three goals. First, to “improve public policy by conducting rigorous analysis, linking diverse interests to pursue common TABLE 3.3.1 The global warming and climate change program case in context

High Complexity High Salience Issue or Problem

Low Complexity

High Dynamism Consensus as dominant style

Global Warming and Climate Change Program A case of high complexity in a support and coordination scenario, with periods of increasing contestation over time

Medium uncertainty

Low Dynamism

Medium uncertainty

Low uncertainty

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cause and insisting on tangible results”; second, “to inform the public by providing useful data that illuminate the issues and trends shaping our world”; and third, “to invigorate civic life by encouraging democratic participation and strong communities” (Pew Charitable Trust 2018).

Description of the specific program PCT began its climate work with the global warming and climate change program in 1990 under the leadership of Joshua Reichert. Pew collaborated with the Energy Foundation to make a total of 261 grants worth $39.8 million over a span of 8 years. The program ended in 1998, when PCT founded the independent, nonpartisan, not-for-profit Pew Center on Global Climate Change (Kohler 2007: 204). The center’s mission was to “provide credible information, straight answers, and innovative solutions that address global climate change.” As such, it worked “to [depoliticize] global climate change as a domestic issue and . . . [work] with the more constructive elements of the business community” (Kohler 2007: 204). In 2011, the center separated from PCT and became an independent, nonprofit organization: the Center for Climate and Energy Solutions (C2ES). It was funded from a broader base of charitable and corporate sponsors, including three strategic partners: Entergy, HP, and Shell.

Origins and rationale Several factors contributed to Pew’s decision to work on climate change and invest in the Energy Foundation. When PCT created the program in the 1990s, there was a growing body of evidence on the reality of climate change and a heightened awareness of its dangers. Moreover, it felt that the federal government was not adequately addressing the issue. Pew sought a change in course from the early 1980s, when the Reagan administration drastically cut the federal budget for energy conservation. Even where the issue was recognized, there was little consensus on what to do. This was also at the time of the Persian Gulf War, when many officials were growing concerned about US dependence on foreign oil. Although the idea for creating the Energy Foundation was already hatched in 1989, the crisis underscored the need for a new energy strategy (Teltsch 1991). The initial program was conceived as a means to find nonpartisan policy solutions based on deeper research and analysis.

Design and implementation Phase 1: global warming and climate change program (1990–1998) The global warming and climate change program began in 1990 with a partnership between Pew and the Energy Foundation that Pew helped found. Pew and the Energy Foundation built a group known as the “Regulatory Reform Network,”

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which became the force behind reform efforts to improve the environmental performance of electric utilities, a major source of greenhouse gases (Welch et al. 2004). The Energy Foundation was a joint initiative of the John D. and Catherine T. MacArthur Foundation, the Rockefeller Foundation, and the Pew Charitable Trusts (since then, the McKnight Foundation, the Joyce Mertz-Gilmore Foundation, and the David and Lucile Packard Foundation have become partners as well). It was established in 1991 with the belief that through cooperation, the partnering foundations could leverage enough funds to make meaningful changes to the nation’s energy policies. The underlying logic of the foundation was based on interviews with more than one hundred “veterans of energy crises” from business, government, academia, and the nonprofit world (Energy Foundation 2000). The program was launched upon the recommendation of Joshua Reichert, who was the director of Pew’s Environment Program at the time. Reichert believed that the time was ripe to invest more in research and analysis on global climate change. In spite of mounting scientific evidence that global warming would pose an unprecedented threat to the earth, there was virtually no federal action to prevent this. Feeling hopeless about its ability to effect changes on the federal level, the program focused on raising awareness of climate change on the state level first. Pew focused on a group of several states, including New York, Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire, and Maine. It then created a coalition of groups throughout the US to depoliticize the debate and encourage states to support more sustainable practices (Kohler 2007). By raising awareness on global warming, they sought to convince state governments to invest in renewable energy. Methods included providing resources on carbon pollution standards and climate change, making frequent media appearances, collaborating with partners to support the use of more environmentally friendly vehicles, and launching the award-winning “Make an Impact” program that helped employees and consumers reduce their carbon footprints (Kohler 2007). Within five years, Pew and the Energy Foundation had managed to build an extensive network of 19 reform groups across 37 states. Collectively, they contributed a $9.6 billion investment to energy-saving programs, reducing the demand for peak electricity and annual electric sales by an estimated 0.5% and 2%, respectively (Welch et al. 2004). By 1998, the program had given a total of 261 grants worth $39.8 million over the span of eight years. However, the program had not succeeded at scaling up climate change initiatives from the core states it worked with. That same year, Pew decided to bring the program to an end and to create the independent, nonpartisan, not-for-profit Pew Center on Global Climate Change in its place (Kasperson et al. cited in Kohler 2007: 204).

Phase 2: The Pew Center on Global Climate Change (1998–2011) At the time, Eileen Claussen had just left government and was asked to write a small study outlining what she thought the center should focus on if it wanted to make a major investment to combat climate change on the national level. Claussen

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was subsequently asked if she would lead this initiative, accepting under the condition that the center would be independent, in spite of its affiliation and funding from Pew ( Claussen 2017). The objectives of the center differed from those of the previous program in that the focus would be more national and that there would be close engagement with the business community. This led to the creation of the Business Environmental Leadership Council (BELC) as an advisory body to the center. This was one of the largest business consortiums dedicated to climate change with 44 members at its peak. BELC was CEO driven, and businesses had an incentive to join the council, as there was a general understanding that being proactive on climate change would lead to competitive advantages down the road ( Philander 2012). However, the imposition of membership fees, leadership changes, and company mergers led to frequent fluctuation in the membership base ( Claussen 2017). In 2006, the Pew Center on Global Climate Change released its first comprehensive plan to reduce greenhouse gas emissions in the US. It published the Agenda for Climate Action, which was the culmination of a two-year research effort to arrive at “recommendations on economy-wide mandatory emissions cuts, technology development, scientific research, energy supply, and adaptation with critical steps that can be taken in key sectors” (Pew Charitable Trust 2006). At this point in time, the overall goal of the trust’s climate change efforts was to promote policies that would reduce the emissions of greenhouse gases, which drive global warming. It specifically focused its efforts on 1) making the electricity sector more sustainable by promoting renewable energy sources, 2) pushing for policies that would reduce pollution from power plants, and 3) encouraging better business practices and government policies to cut back on carbon dioxide and other greenhouse gas emissions. Pew conceived its role as being a source of independent and credible information on climate change, its impact, and possible solutions. Having an objective forum for discussion was particularly important, given the highly politicized nature of the debate at the time. The center commissioned over 100 peer-reviewed reports on the impact of climate change, testified to the US Congress 30 times, and reached over 4,000 opinion leaders with its research ( Philander 2012).

Transition from a private foundation to a nonprofit organization Under the leadership of Rebecca Rimel, who has served as president of the trusts since 1994, Pew restructured to an independent public charity in 2004. The board had already begun to explore options for a new legal structure in 2001 (Rimel 2004). According to Rimel, this change would allow the trusts to better fulfill the core mission by allowing for more administrative flexibility and efficiency. It also consolidated its programs from a total of seven to three ( Strom 2003). A decade prior, Rimel claimed, the foundation had been “at the forefront in developing focused, results oriented strategic philanthropy to respond to the challenges of that era” (Rimel 2004). The board believed this change would allow the foundation to

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be a frontrunner once again by becoming the nation’s largest independent public charity with over $4 billion in dedicated assets and more than $200 million in revenues in 2004 (Rimel 2004). At the time of this transition, there was a downturn in the stock market that cost Pew $1 billion, resulting in significant cutbacks in management and cost-saving measures (i.e., cutting 20% of its staff) (Horn 2003). Pew used this opportunity to focus more on direct services and tax-exempt activities, while transitioning some of its grant programs to independent (but affiliated) centers. For this reason, Pew cut its funding to the Pew Center on Global Climate Change.

Phase 3: The Center for Climate and Energy Solutions (2011–present) As part of its transition from a grantmaking institution to an operating charity, PCT discontinued most of its grantmaking. By November 2011, the Pew Center on Global Climate Change lost its annual funding of $3.5 million from Pew, which had made up about 70% of its operating income (Ward 2011). For this reason, it had to re-establish itself as the Center for Climate and Energy Solutions (C2ES) and seek external sources of funding. However, Pew took considerable measures to provide a sense of continuity in partnerships and momentum for the center ( Center for Climate and Energy Solutions 2011). The C2ES describes itself as an “independent, nonpartisan, nonprofit organization working to advance strong policy and action to address the twin challenges of energy and climate change” (Center for Climate and Energy Solutions 2017). As before, the center emphasized provision of research and solutions for both business and policy leaders. Its mission and strategic approach continued to focus on working together with the business community to promote “pragmatic, effective policies at the state, national, and international levels” (Center for Climate and Energy Solutions 2017). Moreover, C2ES maintained the position that there is a strong scientific consensus that climate change is real, is happening now, and is largely the result of human-induced activities (Philander 2012). When Pew announced that it would no longer be funding large grants, the center reached a critical juncture. It could attempt to either raise its own funds under a new name or close shop entirely. Claussen was skeptical at first about the center’s ability to raise enough money but tried it regardless. She made several phone calls to members of the BELC and managed to secure $1 million from five companies ( Claussen 2017). Fund-raising proceeded on a year-to-year basis. Securing long-term funding was difficult, however, as the center worked primarily in cooperation with businesses and was therefore not perceived as a typical environmental group. It received funding from a consortium of business giants, including Entergy and Shell, and acted more as a bridge between the environmental groups and the business community. For this reason, it did not manage to secure funding from the large foundation working on climate change (Claussen 2017). The center also tried to be in the political middle – the center of the debate – rather than on the extremes. However, this became increasingly difficult as the

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political middle was shrinking. Climate change had started out as a bipartisan issue; C2ES worked together with Senators John McCain (Republican) and Joe Lieberman (former Democrat) to introduce a cap-and-trade system on the federal level (the Climate Stewardship Acts), on which Congress voted three times. The votes were bipartisan at the time, but as the years progressed, the issue became partisan to the extent that it became nearly impossible to find Republican support for the bill. For example, only seven Republicans voted in favor of the WaxmanMarkey Bill, many of whom ended up losing their seats in Congress as a result of this vote (Claussen 2017). Claussen stayed on board for three years to allow for a smooth transition. This was important because it created continuity and facilitated the program’s development. Businesses (37%), foundations (35%), and the government (23%) primarily support the center (Center for Climate and Energy Solutions 2016a). The process of finding a successor was very long and involved, as it wanted to ensure a strong continuation of the center’s work. Eventually, Bob Perciasepe, a former EPA deputy administrator, was hired as new director. He was considered a very strong candidate because of his experiences on the federal, state, and local level (Claussen 2017).

Outcomes and impact The global warming and climate change program “was widely recognized in the United States and abroad as a credible, independent force for pragmatic climate action” (Center for Climate and Energy Solutions 2016b). The Regulatory Reform Network supported 19 reform groups in 37 states that promoted $9.6 billion investments in energy-saving programs. These reduced national peak energy demand by 0.5% and reduced annual electric sales by 2% (Welch et al. 2004). The Pew Center on Global Climate Change boasts several achievements as well (Center for Climate and Energy Solutions 2016b): •

• •

• •

Publishing close to 100 peer-reviewed reports on climate science, economics, policy, and solutions; these reports were distributed to over 4,000 opinion leaders (Philander 2012); Testifying before Congress 30 times and working to promote bipartisan legislation; Advising the Regional Greenhouse Gas Initiative, the Western Climate Initiative, Fortune 500 companies, and states and regions across the country on climate and energy issues; Advancing international climate efforts by serving as a communication platform for ministers and negotiators; Engaging over 100,000 people across 16 states and the UK to save energy and money through the “Make an Impact” program.

The Business Environmental Leadership Council (BELC) created by Claussen was an important counterweight to the growing consensus among climate change

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skeptics. The decentralized and independent nature of the Pew Center on Global Climate Change allowed Eileen Claussen to act with urgency and agility without the bureaucratic constraints of a board. As a member of the US Climate Action Partnership, Claussen also led Pew’s efforts to reduce greenhouse gas emissions through a government cap-and-trade program. In 2009, the Pew Center on Global Climate Change was recognized by 139 national climate change experts as one of the top nonprofit organizations working on climate change (Andrews 2010). Although several attempts at federal legislation, i.e., the American Clean Energy and Security Act (a.k.a. the Waxman-Markey Bill) did not make it to the floor of the Senate, Claussen notes that getting bills to the House of Representatives was a major achievement in itself, although she does not take credit for this on behalf of the center ( Claussen 2017). The Pew Center was part of a coalition called the “US Climate Action Partnership,” which consisted of other environmental groups, many of which were also members of the BELC. The failure to pass federal legislation is not necessarily a reflection on Pew and C2ES’s efforts but largely a result of the fact that climate change has become such a partisan issue that the Democrats are simply lacking the majority of votes. In hindsight, however, Claussen wonders whether they missed an opportunity or moved quickly enough when partisan support existed. But these questions are difficult to answer. Is there anything that Pew and the Center for Climate and Energy Solutions could have done to build more of a consensus prior to the vote?

Ambiguity and benign fallibility Creating a network model When Pew decided to work on climate change in the 1990s, it knew that this issue was too huge and complex for a single foundation to work on. For this reason, it collaborated with the Rockefeller Foundation and the John D. and Catherine T. MacArthur Foundation to create the Energy Foundation in 1990. The foundation needed to begin by investing in levers of change rather than attempt to promote change on its own. Taking advantage of its financial and political independence, Pew contributed to a $20 million investment together with its two partners. The Energy Foundation therefore had “unfettered resources, not tied by ideological in-fighting” (Teltsch 1991). The foundation was essentially part of a coalition of philanthropies that went around the inertia of the US Congress to provide funding for organizations and interest groups working on climate change. It took a strategic approach to a philanthropy by creating a foundation that served as a “strategic intermediary” and “pass-through,” allowing climate change activists to be a stronger and united force in the face of opposition ( Orsini 2017). Although several attempts at legislation were turned down in Congress, the efforts on behalf of Pew and the Energy Foundation would have arguably never made it as far if they had not followed a strategic and network-oriented model.

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Selectively responding to signals to balance internal needs Pew began working on climate issues at time when awareness of and concern about climate change were growing worldwide. It therefore saw an investment opportunity to promote the popular and growing concern of global warming. It expanded its work to a stand-alone center in 1998 and brought in a new leader who had access to a powerful network at a time when skepticism was rising. When climate change became more contested and federal spending remained low, Pew created the Center on Global Climate Change, which had a wider reach and broader impact. This came at a critical point in time, when strong countervailing forces began to emerge. After the Kyoto Protocol was adopted in 1998, climate change became a hugely politicized and contested issue. At this point, industries were lobbying against the regulation of greenhouse gas emissions. ExxonMobil spearheaded these efforts by funding research groups like the Global Climate Science Team, which directly challenged the science behind climate change ( Childress 2012). At the same time, the Global Warming Petition Project was circulating among scientists who believed that climate change was man-made. Although Pew transitioned from a private foundation to an NPO in 2004, it continued funding the Pew Center on Global Climate Change until 2011, finding a balance between cutting its internal costs and providing continuity for its efforts on climate change. Why might Pew have continued funding the center after restructuring from a private foundation to a nonprofit organization? Were there any strategic advantages?

Responding to contextual changes In spite of extensive funding efforts, climate change legislation did not pass at the federal level. To date, the US has not re-ratified the Kyoto Protocol after it was dropped in 2001, and many other federal efforts have faltered. The McCainLieberman Climate Stewardship Act died in a 2005 Senate vote; the Global Warming Pollution Reduction Act of 2007 failed; and the American Clean Energy and Security Act of 2009 (ACES) passed in the House but never made it to the Senate. There was a brief win in 2007 with the Supreme Court ruling that permitted the EPA to regulate carbon emission, but Republicans attempted to reverse this in 2011 ( Gardner 2011). It has been a long and bumpy road, to say the least. Pew responded to this by changing its approach as necessary. When hope for federal environmental legislation diminished, PCT focused more on smaller scale initiatives at the state level, which proved to be a more effective strategy ( Gardner 2011).

A premature exit? For strategic and financial reasons, Pew completely discontinued its work on climate change in 2011. This was a huge risk to the survival of the center, as it had depended on Pew for about 70% of its funding. Raising funds was challenging,

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as it was not part of the environmental groups and largely depended on financial contributions from the members of BELC. Although the center did survive Pew’s departure, it lost a significant amount of funding and arguably had less room for maneuver. Although Pew continues to work on environmental issues as an operative NGO, it focuses primarily on conservation and no longer dedicates any funds to climate change. However, climate change continues to be seen as a top global threat by populations across the world, particularly in Latin America and Africa, even though it is less of a concern to Americans, who rank climate change secondto-last among seven global threats.6 President Barack Obama attempted to push the agenda forward through such ambitious policies as the Clean Power Plan, but much work remains to be done in the now hostile environment of the Trump administration.7 Moreover, climate change funding still only constitutes less than 2% of philanthropic funds going toward climate change. Although the Center for Climate and Energy Solutions still actively works on these issues and heavily promoted the Paris Climate Agreement, the trusts have decided to remain outside of this picture ( Claussen 2017). How does this reflect foundations’ weaknesses, despite being politically and financially independent institutions?

Conclusion Pew’s work on climate change from 1990 to 2011 underwent several changes as a result of both internal restructuring and changes in policy environments. PCT had to be flexible in its work in order to adapt and adjust to political openings, for example by working to implement cap-and-trade programs in states. Pew had to balance its own long-term financial viability with finding ways to institutionalize its work on climate change so that efforts would continue beyond its own departure from the issue. This case essentially demonstrates the ability of a foundation to mobilize immense resources to catalyze policy changes but that any amount of money may not suffice when an issue has become politicized to the point of total political gridlock. A rigid political context can therefore act as a disincentive for a foundation to continue engaging with an issue, especially if the problem is a wicked one.

Study questions 1)

2)

What does this case teach us about the opportunities and constraints of philanthropy in democratic society? How can performance measures take into consideration the political complexities of an issue? In the beginning, Pew’s work on climate change was part of a larger environmentalist movement supported by other major foundations

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under the umbrella of the Energy Foundation. Why might the partnering foundations have created a new foundation to cooperate, rather than partnering directly with each other? Once the Center for Climate and Energy Solutions was no longer associated with Pew, it became more dependent on corporate funding and was more removed from environmental groups. Discuss some of the advantages and disadvantages of having ties to energy corporations and “being in the middle.” How can foundations that seek a bipartisan consensus best navigate a polarized political environment?

References case 3 Andrews, E. (2010, November 7). Press Release: 15 Top National Climate Change Nonprofits Identified by 139 Experts. Philanthropedia. Retrieved 23 February 2018, from www.myphilanthropedia.org/blog/2010/11/07/press-release-15-top-national-climatechange-nonprofits-identified-by-139-experts/ Center for Climate and Energy Solutions. (2011, November 9). Yes, You’ve Come to the Right Place. Retrieved 23 February 2018, from www.c2es.org/2011/11/yes-youve-cometo-the-right-place/ Center for Climate and Energy Solutions. (2016a). Our Supporters. Retrieved 11 May 2016, from www.c2es.org/about/supporters Center for Climate and Energy Solutions. (2016b). History. Retrieved 20 May 2016, from www.c2es.org/about/history Center for Climate and Energy Solutions. (2017, July 11). About C2ES. Retrieved 23 February 2018, from www.c2es.org/about/ Childress, S. (2012, December 23). Timeline: The Politics of Climate Change. Retrieved 23 February 2018, from www.pbs.org/wgbh/frontline/article/timeline-the-politicsof-climate-change/ Claussen, E. (2017, December 29). [Phone Interview], Pew Charitable Trusts. Energy Foundation. (2000). Annual Report. San Francisco, CA; Beijing: The Energy Foundation. Retrieved from www.ef.org/wp-content/uploads/2013/04/2000_EF_Annual_ Report.pdf Gardner, T. (2011, March 4). Republicans Launch Bill to Axe EPA Carbon Rules. Reuters. Retrieved from www.reuters.com/article/us-epa-emissions-bill/republicans-launch-billto-axe-epa-carbon-rules-idUSTRE7226UJ20110304 Horn, P. (2003). Pew Charitable Trusts to Change Governing Structure, become Public Charity. Knight Ridder Tribune Business News. Kohler, S. (2007). Sustainable Environment Programs: Pew Charitable Trusts, 1990. In J. L. Fleishman, S. Kohler, & S. Schindler (Eds.), Casebook for the Foundation: A Great American Secret. New York, NY: Public Affairs. Orsini, A. (2017). Globalising the Climate: COP 21 and the Climatisation of Global Debates. International Affairs, 93(5), 1263–1264. https://doi.org/10.1093/ia/iix151 Pew Charitable Trusts. (2006, February 8). Pew Center on Global Climate Change Releases First Comprehensive Approach to Climate Change. Retrieved 23 February 2018, from http://pew.org/1Q6Z2u5 Pew Charitable Trusts. (2018). About-Mission and Values. Retrieved 23 February 2018, from www.pewtrusts.org/en/about/mission-and-values

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Philander, S. G. (Ed.). (2012). Encyclopedia of Global Warming & Climate Change (2nd ed.). Thousand Oaks, CA: Sage Publications. Rimel, R. W. (2004, Summer). Transformation. Trust Magazine. Retrieved from http:// magazine.pewtrusts.org/en/archive/archived-presidents-messages/transformation Strom, S. (2003, November 7). Pew Charitable Trusts Will become Public Charity. The New York Times. Retrieved from www.nytimes.com/2003/11/07/us/pew-charitabletrusts-will-become-public-charity.html Teltsch, K. (1991, January 11). In Rare Move, Big Donors Push Energy Efficiency. The New York Times. Retrieved from www.nytimes.com/1991/01/11/us/in-rare-move-bigdonors-push-energy-efficiency.html Ward, B. (2011, December 21). From Pew Climate Change Center To C2ES, What’s behind the Name Change? Retrieved 23 February 2018, from www.yaleclimatecon nections.org/2011/12/from-pew-climate-change-center-to-c2es-whats-behind-thename-change/ Welch, K. A., Aeschliman, L., & Baxter, L. W. (2004, Winter). Evaluation: Environmental Progress in the Electric Sector. Trust Magazine. Retrieved from http://pew.org/2yITYL0 White House. (2016). Climate Change and President Obama’s Action Plan. Retrieved 21 May 2016, from www.whitehouse.gov/climate-change

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Case 4: Fondazione Cariplo, Italy: FHS and social housing Overview of the case This is an example of a foundation working on a highly complex set of problems that are inter-related and nested and involve multiple stakeholders across sectors and at different geographic levels, with varying interests and agendas (Table 3.4.1). The environment was moderately dynamic and increasingly so as the project went on, though it was not overtly politically contentious. Nonetheless, the project challenged established interests in the construction and real estate fields, as well as the financial field, especially mortgage lending markets. The foundation’s style was a mixture of contestation and cooperation. Similar to Theresienthal (see case 9), this case illustrates the capacity of foundations to play the role of creative entrepreneur, taking risks and making links across and within sectors to address a neglected issue. Unlike Theresienthal, which took place in a more or less benign context with all dedicated to save a business, the social housing case reported here challenged established institutions while building new ones to improve public good provision. The foundation had to strike a balance between serving low-income people and limiting the risk factor of social housing projects in order to remain attractive to private investors. This necessarily meant making trade-offs resulting in both winners and losers.

The foundation Fondazione Cariplo is the largest foundation of banking origin in Italy and one of the largest foundations in Europe. With a corpus of over €7 billion, Cariplo spends around €150 million per year (equivalent to a 2% spend out). It receives a 5% return on its endowment; its spend-out rate is intentionally lower to account for inflation (Hartnell 2015). Its assets originate from the Cassa di Risparmio delle Provincie Lombarde (Savings Bank of the Lombard Provinces/Cariplo SpA), which was established in 1823 and is the oldest part of the successor banking group, Intesa Sanpaolo ( Fondazione Cariplo 2018a). Historically, banks in Italy were public institutions that served critical social functions. Following the Amato-Carli Act in 1991, the regional and municipal banks across Italy were privatized. Subsequently, the social dimension of their TABLE 3.4.1 The Fondazione Cariplo case in context

High Complexity Low Salience Issue or Problem

Low Complexity

High Dynamism

High uncertainty

Medium uncertainty

Low Dynamism Conflict as dominant style

Cariplo A case of medium uncertainty and a low-key coordination scenario

Low uncertainty

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work was absorbed by the newly established foundations of banking origin, including the Cariplo Foundation. In addition to charitable work, the purpose of these fondazioni was to manage the assets of their originating banks, though their shareholdings have since been reduced in subsequent rounds of regulation. Today, the foundation leverages its position to support civic initiatives and social organizations that serve local communities in Lombardy (Fondazione Cariplo 2018a). Its work is structured around the areas of environment, arts and culture, scientific research and technology transfer, and social services. It is primarily a grantmaking foundation, but the foundation occasionally works directly on a project with partners, such as in its youth unemployment project. In cases where the Foundation feels that an objective is better served by a dedicated independent organization, it has created “specialized foundations,” such as the Fondazione Housing Sociale (FHS).

Management and governance Foundations of banking origin have both a board of trustees (or steering board in Cariplo’s case) and a board of directors. The trustees have a decision-making function and determine strategic programs for the long-term, while the latter has an administrative function and defines short-term programs according to the guidelines of the trustees. The executive function is handled by the general director, who implements programs. One of the foundation’s key purposes is to promote social and economic development on the regional level ( Rossi et al. 2015). Given the public origin, regional scope, and social nature of Italy’s banking foundations, they may be particularly inclined to engage in public-private partnerships. FHS was the brain child of Cariplo under the visionary leadership of Pier Mario Vello. It was made independent of Cariplo, but its eight-person board includes members from the foundation. The board also includes members from the Regione Lombardia (the government regional administration) and L’Associazione Nazionale dei Comuni Italiani (ANCI) ANCI Lombardia (the association of Lombardia’s municipal administrators). From the outset, the foundation necessarily conceived FHS as a public-private partnership. In terms of organizational structure, FHS was initially divided into two main areas – one responsible for the finance and management and the other for planning and development. The finance and management office oversaw the various procedures related to implementing the housing projects (i.e., preliminary analyses, feasibility studies, financial planning, strategic partnerships, and negotiations), while the planning and development office was the force behind the architectural design and the social dimensions of living spaces (i.e., design and service design, social management, local relations, urban development, and selection of occupants). Once FIA was established, the Cassa Depositi e Prestiti (CDP) took over the financial management of the fund, as the policies and issues related to social housing had grown increasingly complex. As of 2014, the financial assets managed by CDP amounted to over €3.5 billion. FHS has continued to manage the “planning

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and development” area and plays an important role in terms of promoting new ethical real estate funds throughout Italy. Together with the real estate and savings management firm Polaris SGR (“Polaris”), FHS also provides technical services and advice (an SGR – Societa’ di Gestione del Risparmio – is an external asset management company). With the social housing model having grown from a pilot project to an approach that has been adopted on a national scale, FHS has become more of a reference point for social housing operators and institutions wishing to engage in this model (Fondazione Housing Sociale 2018). In other words, the intention of FHS was not to play a direct role in the management of social housing funds but to promote social housing and test different models, in addition to providing technical services and advice.

Role of the foundation The foundation’s role is primarily innovative but also complementary. The innovative dimension stems from Cariplo’s role in creating the first social real estate fund in Italy and pioneering the concept of “social housing.” Through social entrepreneurship and venture philanthropy, Cariplo sought to help fill the housing gap for a large segment of the population whose housing needs were not being met. It also acted as a bridge-builder by forging public-private partnerships with the regional and local governments and convincing other investors to support its first ethical real estate fund. Cariplo envisioned the role of FHS as “overseer,” ensuring projects were completed, sharing knowledge, and keeping an eye on competence, thereby creating a market rather than a collection of projects. Although Cariplo sought to “be a resource that helps social and civil organizations better serve their own community,” it “does not aim at taking the place of public or private organizations already active in the field” (Fondazione Cariplo 2018b).

Description of the specific program Fondazione Housing Soziale (FHS) is a nonprofit organization that was established by Cariplo in 2004 with the support of the government of Lombardia and the association of the municipalities, ANCI Lombardia. The mission of FHS is “to contribute to solve the housing problem by favoring the access of the disadvantaged to decent dwellings, thus helping them improve their conditions” ( Fondazione Cariplo 2018c). The aim of FHS was to plan, promote, and manage socially oriented housing initiatives. It receives funding from external donations (both public and private) and internal revenues from real estate management, which it uses (among other activities) to build its expertise in providing social housing ( Del Gatto et al. 2012: 114). The work of FHS encompasses not only housing but also ethical investments in real estate, urban renewal, neighborhood building, welfare housing, and the environment, as well as mission-related investments and exercises in cross-sector cooperation and service provision.

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As Cariplo envisaged, FHS focuses on four main goals: the promotion of ethical finance initiatives and real estate funds dedicated solely to social housing, testing innovative management models for nonprofits in the field of social housing, the development of instruments for project design for the entire housing sector, and setting up a public-private partnership to coordinate initiatives with existing housing policies. In addition to housing, the work of FHS combines ethical and mission-related investments of its assets in real estate with the support of urban renewal initiatives and neighborhood revitalization and exercises in cross-sector cooperation (Leat 2014: 43). It is important to note that Cariplo’s Social Housing Program has a dual identity – it is both an economic enterprise that must guarantee a return to investors, however small or risky this may be, and, at the same time, it is an institutional endeavor that aims to promote a model of housing that is built on effective public-private partnerships between public administrations and private investors to address housing needs for low- and middle-class people (Evers et al. 2014: 192). Moreover, Cariplo’s social housing model emphasizes the importance of a “social manager model,” in which real estate and social issues are jointly managed in a mutually beneficial manner (Del Gatto et al. 2012: 112). For example, creating spaces for positive social relations between diverse groups of residents helps to create thriving communities but also reduces the risk of conflict within the community that could undermine the appeal of these places.

Origins and rationale Social housing had been a strategic sector for Cariplo for several decades, and the creation of Fondazione Housing Sociale was rooted in the housing crisis in Milan. The housing market in Lombardy underwent considerable change in the 1990’s – rising housing demands from single-income families, students, temporary workers, and immigrants were met with housing costs that were rising much faster than household incomes. The number of people unable to afford the higher rents in the open market was growing rapidly. Yet those priced out by the rental market did not qualify for public housing, which was only accessible to the very poorest households. The public housing sector, still in its infancy in Italy, was unable to meet the demands of those people with “some but not enough” income (Leat 2014: 44). Starting in 2000, Cariplo had a grantmaking program in the area of social housing to support the more vulnerable members of the urban population in Lombardy. Over the 10 years prior to creating FHS, Cariplo allocated €39 million to some 200 projects (Leat 2007). However, after several years, Cariplo realized that the limited amount of resources it could provide were no long-term solution to the mismatch between housing supply and demand. It decided to take a more innovative and sustainable approach that combined a range of novel features, including ethical investments and partnerships with other public and private institutions. The foundation thus moved away from its focus on providing housing

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to low-income families and founded the “Fondazione Housing Sociale” (FHS) in 2004 (Fondazione Housing Sociale 2014). FHS soon became part of a complex finance system of regional and eventually national funds, including institutional investors (e.g., other Italian foundations, major banks, and insurance companies), and importantly also local investors such as smaller foundations, cooperatives, public agencies, and private real estate investors.

Design and implementation Phase I – a grantmaking program (2000–2004) By the late 1990s, it was evident that the public housing authorities of Lombardy did not have the capacity to rent out and maintain many of their public properties. As a result, vacant buildings were deteriorating while the demand for housing was rising. Having already been active in giving support in the housing field in an ad hoc way, Cariplo decided to intervene with a specific grantmaking program to serve low-income families. It partnered with nonprofit organizations (NPOs) that renovated the derelict buildings and served as intermediaries between renters and the regional government. The NPOs were responsible for managing and renting out the properties, while Cariplo guaranteed the funds to renovate and maintain these buildings (Barbetta 2018). Although the Foundation was providing grants to refurbish public housing, this was outside of the context of a public-private partnership. Instead, the Foundation chose to work with government indirectly via NPOs. This arrangement was a result of a power struggle that existed between the national government and the Association of Italian Savings Banks and Foundations (ACRI) at the time (Barbetta 2018). A proposal advanced by Senator F. Debenedetti (September 7, 1995) sought to cap the bank shareholdings of the fondazioni at 15%. This idea was later advanced in the Tremonti Reform of the 2002 Budget Act (December 28, 2001), which aimed at increasing municipal representation on the boards of the banking foundation by stipulating that representatives of local government bodies (i.e., regions, provinces, and municipalities) needed to hold a majority of the seats on the foundations’ board ( Crivellaro n.d.). The legislative attempt to reabsorb the banking foundations into the public sector would have been a huge setback for the foundations, which risked losing the independence and juridical autonomy they had gained from the Amato-Carli Act of 1991. The struggle between ACRI and the national government persisted until 2003, when the Constitutional Court settled the issue by definitively rejecting Tremonti’s proposal in a historic ruling that codified the private jurisdiction of the 88 foundations of banking origin. Cariplo’s decision to provide grants to NPOs was largely informed by the power struggle between ACRI and the public authorities. In its first two years, the grantmaking program supported 17 projects and provided some €4 million in grants – a small contribution in light of the colossal needs ( Fondazione Cariplo 2018d). Although the foundation knew that this was not the most effective or

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sustainable approach to social housing, it served the purpose of making a statement about Cariplo’s political independence.

Phase II – establishing the Social Housing Foundation (2004) As mentioned, the limited amount of resources Cariplo could provide via grants were no long-term solution. The foundation also knew that simply providing a living space was not enough to improve people’s quality of life. Those in need of housing tended to be part of the more vulnerable segments of society – i.e., senior citizens, migrants, and people with disabilities – whose needs for social services were rarely met. This shortcoming related to the broader issue of fragmented service provision in Italy, which is especially challenging in contexts where different levels of government are in opposition to each other, as has tended to be the case in Lombardy (Barbetta 2018). It was evident that a more innovative and sustainable approach was needed, both for managing rental properties and implementing social policies. Cariplo therefore began mobilizing efforts to build a social housing fund that would allow for the construction of entirely new housing projects in an approach that combined social welfare, housing, and urban planning. This would go far beyond refurbishing public housing and serve to address the gray area of housing demand. But for this strategy to succeed, Cariplo needed to make a convincing case for subsidizing middle-income people. The senior management was essentially asking the board to take a leap of faith into unchartered territory. Not only did they have to demonstrate to public authorities that the project could be scaled-up beyond the local level, but they also had to convince the board to make a considerable investment of its own. To further explore this option, Cariplo commissioned a feasibility study from the Milan Polytechnic University on autonomous, sustainable, social housing systems that included options on scale, financing, and management. In 2003, the study was published and discussed intensively among the board and its growing network of stakeholders. Although the social housing model was feasible in theory, some feared that this investment would not yield sufficient returns and that the foundation risked losing too much money. Others felt that the money should go directly to lower-income individuals or that there were more deserving causes. Eventually, however, the then director convinced the chairman of the board that it was worth investing a limited amount of money to test the idea. Arguably, an important selling point was that unlike Cariplo’s grantmaking efforts, social housing targeted a safer segment of the population with annual incomes between €12,000 and €50,000 (Leat 2014: 45–46). Thus, this strategy did not address the housing needs of the most vulnerable groups of the population but rather aimed for a mix of incomes that would reduce the risk of investment. Given the dysfunctional system of public housing, should the foundation have taken the more charitable route and found a way to better meet the needs of the lowest income classes?

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Eventually, Cariplo decided to move forward with the idea and partnered with Regione Lombardia and ANCI Lombardia to establish the Fondazione Housing Sociale (FHS) in 2004. Its mandate was to build a social housing fund to finance economically sustainable housing projects and hence be independent from foundation grants (Barbetta 2018). Initially, Cariplo covered only FHS’s set-up and operating costs, but in the following year, it made a considerable investment together with eight other high-profile public and private organizations (including Regione Lombardia), creating an initial fund of €85 million; Fondazione Cariplo, Regione Lombardia, Cassa Depositi e Prestiti, Banca Intesa San Paolo, Banca Popolare di Milano, Assicurazioni Generali, and Cassa Geometri invested €10 million each, and Telecom Italia and Pirelli invested €2.55 and €2.45 million respectively. This created the Fondo Abitare Sociale 1 (ethical social housing fund). The fund has a life span of 20 years and was intended to subsidize income from fees for technical services, such as architectural advice and business planning. It is managed by Real Estate Polaris SGR, while FHS was responsible for ensuring that it maintained a social purpose.

Phase III – scaling up social housing funds (2006–2009) In 2006, the fund was transferred to a new collective investment model, the Fondo Federale Immobiliare di Lombardia (the Real Estate Fund of Lombardy/FIL). It has the same investors as the Fondo Abitare Sociale 1, in addition to others, such as Prelios and Fondo Investimenti per l’Abitare. The fund offered investors returns of 3% above inflation, capped at 4%, on twenty-year investments. The idea was that at the end of the 20 years, some renters would have the opportunity to purchase their apartments, as a portion of their rent would go toward paying the owner (affito con riscatto). But at this point, there was no way of knowing how well this would work. Before the 2008 financial crisis, this was considered a very low return on investment, but Cariplo encouraged others to prioritize the social aspect of the fund. As one of the oldest and most established foundations of banking origin in Italy, Cariplo also had access to an extensive network of private investors. In fact, many of the initial investors had been linked to Cariplo SpA in one way or another. For instance, the Banca Intesa San Paolo was created from a merger between Cariplo and Banco Ambrosiano Veneto in 1998, and Assicurazioni Generali was also an investor in this bank. Thus, Cariplo was well positioned to lead a group of partners that would pave the way for other investors. Today, the FIL has grown to €225 million. Setting up the fund was one thing, but acquiring properties was another. Cariplo started with several small projects on green fields in Milan and Crema that local authorities were willing to lease at a discounted rate. This demonstrated that properties could be managed according to the principles of social housing, but it was difficult at first to find investors who agreed to prices below the market rate.

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The established market price was based on an average of €2.5 thousand per square meter, but the project’s viability depended on a price of no more than €1.3 thousand. Developers fought back, insisting on higher prices, but FHS was adamant – “[T] ake 1.3k or no deal” (Leat 2014: 47). In the end, most developers gave in because the housing market was fairly stagnant at the time, prompting them to accept the lower prices. This may have been strategic, especially because investors were locked-in over the span of 20 years. Cariplo seized an opportunity, but are there potential wider or longer-term disadvantages to this approach? Housing developments combined urban and environmental planning, high-impact social and commercial services, and occasionally special residential services. Ideally, both local stakeholders and investors would agree on these elements at the outset, so they could be included in the implementation contract prior to finalizing the building design and development, property allocation, and property and community management (Leat 2014: 47). However, at times, there were disagreements, and the foundation had to negotiate fiercely with real estate developers in order to keep the price per square meter low. When building housing projects on public land, FHS also had to negotiate the number of people it would accept from the low-income group on the waiting list for public housing (Barbetta 2018). The inclusion of low-income people was a condition of building on public spaces. The foundation had several goals in this program. What were the tensions between them, how were they managed, and what were the trade-offs? Following the financial crisis of 2008, there was a shift in legislation on housing away from the traditional social model toward private investments, which ultimately led to the Piano Nazionale per l’Edilizia Abitativa (National Social Housing Plan) in 2009 and the creation of the national Integrated Funds System (SIF). That same year, the national real estate fund system Fondo Investimenti per l’abitare (FIA) was established. This is managed by CDP Investimenti SGR, a branch of Cassa Depositi e Prestiti SpA (CDP) and serves as a platform to launch and support closed-end real estate funds. The FIA manages funds amounting to €2 billion and €28 million and supports a total of 41 projects throughout Italy (Barbetta 2018). It is worth noting that the financial crisis played a role in catalyzing the government to pass the National Housing Plan, as it became clear that the old way of distributing resources to the regional authorities to build housing was not effective. This provided an opportunity to try a new approach, even though there were no resources to scale-up the existing building projects. Moreover, it was a buyer’s market. Private landowners were anxious to sell in a difficult market, which worked in Cariplo’s favor (Leat 2014: 48).

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TABLE 3.4.2 Time line of major development in social housing

2003 2004

2005 2006 2009 2009

Milan Polytechnic University conducts a feasibility study on autonomous, sustainable, social housing systems. The Social Housing Foundation (Fondazione Housing Sociale (FHS)) is created in partnership with the regional government administration of Lombardy and the association of Lombardy’s municipal administrators (ANCI). The Social Housing Fund (Fondo Abitare Sociale 1) is created. The Social Housing Fund is transformed to a collective investment model under the Fondo Federale Immobiliare di Lombardia (FIL). The National Housing Plan (Piano Nazionale per l’Edilizia Abitativa ) is passed, which set up the Integrated Funds System (SIF). The national real estate fund system Investment Fund for Housing (FIA) (Fondo Investimenti per l’abitare) is established.

Outcome and impact The main contribution of Cariplo’s social housing program was the development of a housing model that attracted thousands of lower- and lower-middle-class residents thanks to the discounted housing prices and the quality maintenance of properties (Barbetta 2018). Another positive outcome is that the social housing projects are usually built on the outskirts of cities, which tend to be less appealing places to live because of higher levels of social problems. The social housing model has helped make these neighborhoods more appealing to middle-class residents and in theory has contributed to more economically diverse communities (Barbetta 2018). In terms of concrete outcomes, Cariplo’s work on social housing contributed to a total of 31 social housing funds throughout Italy that are run by nine asset management companies, as of December 2016 ( Fondazione Housing Sociale 2017). FHS claims that these have the potential to implement 270 projects and create over 20,000 social homes and 8,500 temporary apartments for students ( Fondazione Housing Sociale 2017). It is unclear, however, to what extent these are hypothetical benchmarks or concrete achievements. Even in the case of the latter, it is worth bearing in mind that these numbers are just a drop in the bucket when it comes to the housing needs of Italy’s population at large. However, Cariplo’s remit is not Italy as a whole. Beyond this, it is impossible to determine how social housing has impacted the lives of residents, as there is no personal data on residents. The model appears to be successful based on anecdotal evidence; i.e., it is “making communal spaces and services available for an activity that is for everyone’s benefit” ( Fondazione Housing Sociale 2017). The fact that it was used as part of Italy’s National Housing Plan also suggests that the model is successful. Though, as mentioned, the financial and sovereign debt crisis starting in 2008 did play a role in the decision to privatize social housing.

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Ambiguity and benign fallibility A unique governance context – limited replicability? Cariplo’s independence, reputation, and access to high-level government and financial networks were key factors in its ability to attract investors. This allowed the foundation to challenge established interests and create cross-sectoral partnerships despite the difficulty of bringing together public and private stakeholders with different incentives and goals. FHS succeeded in attracting private stakeholders while being partially embedded in the local welfare system. It is possible that the initial investors of the social housing fund (apart from the Cariplo and the municipal and regional governments) were “captive investors” because of the leverage Cariplo had as a foundation that originated from one of Italy’s biggest and oldest banks. This raises the question of how replicable this model is for other foundations. Indeed, one of the challenges the foundation highlighted pertains to the difficulty of developing social management models outside of Milan, where the foundation’s network runs deep (Leat 2014: 51). Rather than relying on its reputation and favorable market conditions, how could Cariplo have created a stronger culture around investing in ethical funds over the long term?

A new pragmatism – selection bias? The “social manager” model is thought to be a crucial component of vibrant social housing communities. On the one hand, the model addresses the social needs of the residents; on the other hand, it reduces the risk of the investment by helping to minimize delinquencies, the risk of unemployment, social conflict, and so on. It is important to remember that Cariplo’s social housing model was not conceived as a replacement for public housing or private social housing. There are other foundations active in this field, such as Fondazione Cassoni, which established the Villaggio Barona to house some of the most vulnerable people. This foundation was referred to as the “father of social housing in Milan” and runs another social housing project with the support of national funds and Cariplo, among others (Barbetta 2018). As it has a stronger social background, funders have no expectation to see a return on their investment. Under this model, however, the foundation must continuously raise funds to subsidize people’s rent. Unlike Fondazione Cassoni, Cariplo’s housing model was designed for people with higher income levels. The extent to which this social housing model can be considered “successful” depends on the criteria that are applied. It is also difficult to judge to what extent thriving communities are a result of Cariplo’s social manager model or the fact that the people selected for these apartments tend to have fewer social problems associated with abject poverty.

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A necessary trade-off? The foundation had to make a trade-off between selecting lower-income individuals, on the one hand, and creating vibrant and successful communities, on the other. This was part of a strategy to forge sustainable communities that would be stable and attractive to investors. Although many of Cariplo’s housing residents are low-income families, they are generally able to pay sufficient rent to satisfy the projected return on the social investment. The model that Cariplo sold investors in the beginning was one in which the funds were social but also sustainable. It wanted to demonstrate that it could engage in venture philanthropy without wasting and losing money as the government had been known to do (Barbetta 2018). The social housing program does also include some people who are more severely disadvantaged and thus clearly eligible for social housing, but only to the extent that this is compatible with the overall sustainability of the initiative (Barbetta 2018). As discussed earlier, lower-income groups have also been introduced to the housing projects based on the requirements of local authorities for the use of public land. For example, FHS was sometimes required to take 10% of the people on the waiting list for public housing.

Conflicting goals / mission drift? FHS was created with the intention of contributing to solving the housing problem, particularly with regard to economic or socially disadvantaged people who were not poor enough to be eligible for public housing. A further goal was to build living spaces that create environments for positive interactions among residents and are supported by a network of services. In addition to focusing on social housing, FHS works on community welfare – a set of tools, actions, and initiatives that favor access for disadvantaged people and supports them in living a dignified life with positive human interactions ( Fondazione Cariplo 2018c). Social housing is defined as a set of actions, initiatives, and tools – implemented both directly and by facilitating third-party initiatives – aimed at facilitating access for disadvantaged people to decent housing and a social environment conducive to personal and professional growth (Barbetta 2018). To what degree are these goals compatible? How does the foundation define “social disadvantage” in concrete terms, and how flexible is it in applying these criteria? In line with the social principles of Cariplo, FHS targeted those who were not rich enough to find housing on the private market but were not poor enough to access public housing. The issue that led to debate in the foundation was that social housing did not help take pressure from the public housing market. However, some in favor of the social housing model argued that reducing at least some of the tension in the rental market would also benefit people with lower incomes, as they wouldn’t be further squeezed out of the market. However, there is no way of knowing whether this happened. FHS also has no way of knowing if the people

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who were selected for social housing continue to demonstrate social need. While there is data on the number of housing units and apartments that were built, there is no information on socioeconomic class, income, and so on. This would require the foundation to put in place secondary targets (Barbetta 2018). Ultimately, the idea behind the social housing project was not to serve the neediest people but to show that low-cost housing can create viable and vibrant communities for the “squeezed middle” segment of society. As such, the project was less about solving the housing problem and more about Cariplo’s emblematic approach to housing.

Conclusion Cariplo’s project succeeded in promoting the concept of social housing, creating an ethical fund, bringing in local government and developing viable models of housing provisions. The foundation successfully navigated a highly complex program combining several different, inter-related elements and involving multiple stakeholders, across sectors and at different geographic levels, with varying interests and agendas. The foundation had to make a trade-off between addressing the public housing shortage by targeting the lowest income groups and assisting those who did not qualify for public housing or for market rentals. A major challenge was balancing the social and entrepreneurial aspects of housing. In the end, this created winners and losers in terms of people with housing needs. Whether the real estate funds will in fact see a return on their investments remains to be seen.

Study questions 1) 2) 3)

4)

What are the most important criteria for scaling up a project? What role did networks, financial sustainability, and market demand play? What measures could the foundation take to ensure that people living in social housing remain qualified? Discuss how the foundation had to satisfice in order to work in both its own and the public’s interest and some of the trade-offs it made in the process. Imagine that you are leading a new strategic plan for Cariplo’s social housing. There is increasing pressure by the public authorities to accept more people into social housing, as the public housing waiting list keeps growing. Meanwhile, many of the renters who were expected to buy their apartments at the end of the 20-year investment were unable to do so, while others who moved in as students have found high-paying jobs but have become too settled to move. At the same time, several of the major investors have become disenchanted with their low return and left. What do you propose? How do you suggest balancing these conflicting interests?

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References case 4 Barbetta, G. P. (2018, January 9). [Phone Interview]. Cariplo Foundation, Milan. CDP Investimenti Sgr. (2018). Caratteristiche e scopo del Fondo. Retrieved 21 February 2018, from www.cdpisgr.it/social-housing/FIA/caratteristiche-fondo/caratteristichescopo-fondo.html Crivellaro, J. (n.d.). Fumbling Foundations? The Case of the Fondazione di Origine Bancaria in Italy. Center for Commercial Law and Financial Regulation, University of Reading. Retrieved from www.reading.ac.uk/web/files/CCLFR/crivellaro_fondazionibancarie.pdf Del Gatto, M. L. D., Ferri, G., & Pavesi, A. S. (2012). The Social Manager as the Guarantor of Sustainability in Social Housing Interventions. Techne: Journal of Technology for Architecture and Environment, (4), 110–117. https://doi.org/10.13128/Techne-11509 Evers, A., Ewert, B., & Brandsen, T. (Eds.). (2014). Social Innovations for Social Cohesion: Transnational Patterns and Approaches from 20 European Cities. Liege: EMES European Research Network. Retrieved from www.wilcoproject.eu/downloads/WILCO-projecteReader.pdf Fondazione Cariplo. (2018a). The Foundation. Retrieved 21 February 2018, from www. fondazionecariplo.it/en/the-foundation/index.html Fondazione Cariplo. (2018b). Mission. Retrieved 21 February 2018, from www.fondazion ecariplo.it/en/the-foundation/mission/index.html Fondazione Cariplo. (2018c). Social Housing Foundation. Retrieved 21 February 2018, from www.fondazionecariplo.it/en/the-foundation/specialized-foundations/housingsociale.html Fondazione Cariplo. (2018d). Housing Sociale. Retrieved 21 February 2018, from www. fondazionecariplo.it/it/progetti/servizi/housing-sociale/index.html Fondazione Housing Sociale. (2014, January 28). Social Housing in Italy: The Experience of Fondazione Housing Sociale. Retrieved from www.eesc.europa.eu/resources/docs/ gerevini-ppt.pdf Fondazione Housing Sociale. (2017). Origins & Mission of the Fondazione Housing Sociale, Milan. Fondazione Housing Sociale. (2018). Fondazione. Retrieved 21 February 2018, from www. fhs.it/fondazione/ Hartnell, C. (2015, July 1). Interview with Sergio Urbani of the Cariplo Foundation. Alliance. Retrieved from www.alliancemagazine.org/interview/interview-with-sergiourbani-of-the-cariplo-foundation/ Leat, D. (2014). The Inventive Foundation: Creating New Ventures in Europe. London: Barrow Cadbury Trust, Paul Hamlyn Foundation, Calouste Gulbenkian Foundation. Rossi, G., Leardini, C., Moggi, S., & Campedelli, B. (2015). Towards Community Engagement in the Governance of Non-Profit Organisations. Voluntary Sector Review, 6 (1), 21–39. https://doi.org/10.1332/204080515X14251102462737

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Case 5: Robert Wood Johnson Foundation, US: tobacco use program Overview of the case As with Pew (see case 3), this case illustrates high complexity, high dynamism, high salience, and a mixed style of working. The foundation’s role was that of funder, advocate, convener, and collaborator. The case illustrates the work of a foundation over nearly 20 years in a field dominated by a powerful industry and political lobby. It highlights the need for constant adaptation in the light of changing circumstances and prior success and failure. It also highlights the power of research and cross-sector coalitions and the benefits of incremental versus radical change. While the foundation’s large-scale concerted effort created the necessary synergies to advocate for legislative changes, it was a source of substantial risk. Weaknesses are evident in terms of linking actions to outcome in a complex and crowded field.

The foundation The Robert Wood Johnson Foundation is the largest philanthropic organization in the US dedicated to health (RWJF 2018). It is named after the founder of the family firm Johnson & Johnson (J&J), Robert Wood Johnson I. It started out as a small community foundation in late 1936, during the final year of the Great Depression. The son of J&J’s founder, Robert Wood Johnson II, created the Johnson New Brunswick Foundation with 12,000 shares of company stock worth the equivalent of $5.4 million today (RWJF 2012a). Johnson had wanted to help the employees of the Johnson & Johnson (J & J) company get through the tough economic times. In December 1971, the foundation became a national foundation, thanks to Johnson’s bequest of 10,204,377 shares of Johnson & Johnson common stock, worth about $1.2 billion dollars (RWJF 2012b). As its mission suggests, the foundation focuses exclusively on health and health care. Some of its landmark achievements are the development of the 911 emergency call and home-visitation model for nurses. TABLE 3.5.1 The Tobacco Use Program case in context

High Complexity High Salience Issue or Problem

Low Complexity

High Dynamism Conflict as dominant style

The Tobacco Use Program A case of high complexity in a politicking and strategizing scenario, with periods of coordination and cooperation over time

Medium uncertainty

Low Dynamism

Medium uncertainty

Low uncertainty

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Management and governance Steve Schroeder was only the third president to head the Robert Wood Johnson Foundation and an outsider compared to his predecessor ( Iglehart 1989: 191). Schroeder came with his own ideas about the foundation’s mission and the governance structure – he put a greater emphasis on the “health” component of the mission and also created more lines of communication between the board and staff ( Schapiro 2003: 16). Once the board of trustees agreed to work on tobacco, the team that was assembled had a fair amount of flexibility in its work. Schroeder was also a supportive manager regarding proposals from his staff, as he rarely said no to suggestions ( Schapiro 2003: 4). This arguably contributed to the high level of motivation within the team. The staff involved with the various campaigns was highly motivated and engaged with all aspects of the work and largely remained the same throughout the programs. The team actively sought out grant opportunities and shared proposals with the general staff and board. After the first year of programming, the board felt confident about pursuing the issue further and allowed the program to expand, giving very little pushback on the proposals that followed. The leadership of the tobacco use programs therefore enjoyed a fair amount of autonomy.

Role of the foundation Within a wide and opportunistic approach that built on existing efforts and innovated its own, the foundation played various roles throughout the course of the tobacco programs. RWJF played an innovative role not only in terms of the new information it published in its reports but also in the sense that it was virtually the only major foundation working to combat tobacco use. In addition to funding campaigns that sat at the negotiating table with government, it also assisted efforts that were already underway. As such, it also played a complementary role.

Description of the specific program RWJF’s major tobacco programs were a conglomeration of nine major projects with budgets ranging from $7 to $105 million (see Table 3.5.2) ( Center for Public Program Evaluation 2011: 12). A core principle of the tobacco programs was to take a collaborative and multipronged approach that built on existing efforts whenever possible. The goal was to expand the health infrastructure and smokeinhibiting policies while encouraging smoking cessation ( Center for Public Program Evaluation 2011: 3). Over the span of the project from 1991 to 2009, RWJF spent a total of $700 million. The various programs reflect the different approaches RWJF took to combat tobacco, beginning with policy research and ending with a focus on smoking cessation. Research was a key starting point, under-pinning all the foundation’s work.

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TABLE 3.5.2 The Robert Wood Johnson Foundation’s tobacco control programs

Program

Budget

Tobacco and Substance Abuse Policy Research (1992–2011) Smoke-Free Families (1993–2008) SmokeLess States (1994–2010) Campaign for Tobacco-Free Kids (1995–2010) Addressing Tobacco in Managed Care (1996–2008) Bridging the Gap (1997–2012) Helping Young Smokers Quit (2002–2009) Smoking Cessation Leadership Center (2002–2011) Tobacco Policy Change (2004–2011)

$ 43 million $ 29 million $104 million $ 95 million $ 12 million $ 19 million $ 7 million $ 10 million $ 12 million

The reports it published later served as a shield against assertions from the Tobacco Institute (the powerful tobacco industry lobby with well-developed political networks) and helped inform policy proposals on the state and national levels. For instance, the Tobacco Policy Research and Evaluation Program determined which government policies had been the most effective in reducing tobacco use ( Center for Public Program Evaluation 2011: 13). Next, RWJF focused on building coalitions with state-level tobacco control groups. Unlike the grants from the American Cancer Society (ACS) and the National Cancer Institute (NCI), the foundation did not directly fund state-level groups susceptible to the influence of the tobacco industry ( Center for Public Program Evaluation 2011: 14). As such, the grants under RWJF’s SmokeLess States program did not go directly to state government but rather to various advocacy groups. The purpose of the SmokeLess States program was to reduce the number of young people who start using and who are currently using tobacco and to make tobacco use reduction part of any major health-care reforms. To this end, RWJF provided grants to coalitions throughout 19 states that were advocating for higher excise taxes. An important turning point for RWJF’s work was in 1995, when it discovered that the reduction in smoking rates among adults had stagnated and that rates among high school students had in fact spiked since it started working on tobacco control. This was a strong signal that a new approach was needed. The foundation responded by conducting an internal assessment, which concluded that “the conventional public health interventions and foundation grants . . . were not enough to change social norms and drive down prevalence and consumption” ( Center for Public Program Evaluation 2011: 15). RWJF drastically changed its approach by creating new research programs and making existing ones more action-oriented, expanding the number and types of collaborations (e.g., to universities and federal agencies), strengthening its ties to state-advocacy groups, and engaging in strategic communication. A stronger emphasis on collaboration allowed RWJF to unite the disparate tobacco control voices into one dedicated group of professionals under the Center

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for Tobacco-Free Kids, which later became the Campaign for Tobacco-Free Kids that heavily lobbied for federal tobacco regulations ( Center for Public Program Evaluation 2011: 17). In the subsequent years, RWJF’s tobacco work became more politicized, as state attorneys general battled the major tobacco corporations in court and the federal government devised a bill that would have brought the industry under federal control, which ultimately failed in the Senate. RWJF was among many who were disappointed by the subsequent Master Settlement Agreement (MSA), as it did not require states to invest in tobacco control efforts and excluded important provisions on second-hand smoke, federal taxes, and warning labels (Diehl 2003: 18). In response to this disappointing outcome, the board of trustees made the single largest investment in the tobacco use programs – a $104 million grant to scale up SmokeLess States: National Tobacco Policy Initiative to provide matching funds to state coalitions. These required grantees to seek higher excise taxes on tobacco, indoor smoking bans, or Medicaid/state employee health insurance coverage for smoking cessation treatments. However, grantees were strictly forbidden from using RWJF’s grant for lobbying, as this would have violated the tax code ( Center for Public Program Evaluation 2011: 20). While most of RWJF’s work focused on prevention, RWJF dedicated about 18% of its budget to smoking cessation programs. Tactics to this end included transdisciplinary research, insurance coverage, and “quitlines” while the specific goals aimed to increase excise taxes, implement smoking bans, promote prevention and cessation treatments, and seek national protections through the regulation of tobacco products. Based on its policy research, the foundation determined that these pivotal areas would have the most impact on prevention and cessation. In the meantime, the Center for Tobacco-Free Kids, along with many other support groups, had continued advocating to bring the tobacco industry under federal regulation. This goal was realized in 2009, with the Family Smoking Prevention and Tobacco Control Act (a.k.a. Tobacco Control ACT). This give the FDA the immediate authority to regulate the manufacture, distribution, and marketing of tobacco products in the interest of public health (NIH Office of Disease Prevention 2017).

Origins and rationale Apart from being the leading cause of preventable death worldwide, smoking cost the US government billions of dollars each year on medical costs (Centers for Disease Control and Prevention 2018). When the program began, the US was far behind other countries, including England and France, when it came to tobacco controls ( Center for Public Program Evaluation 2011). At the same time, groups like the industry lobby Tobacco Institute were releasing studies that downplayed the risks of smoking. While the overall number of smokers had decreased since the mid-1950s, RWJF saw an opportunity to further “improve the health and health care of all Americans” as its mission states.

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When Steven Schroeder, MD, took up his post in 1990, he began by assessing how the foundation could best improve the health of Americans. Schroeder concluded that the foundation was spread too thinly and that the board was undecided about the issues it wanted to tackle. In his view, the foundation could focus on one or more of the following three goals: 1) keeping people out of the health-care system; 2) improving people’s access to health care; or 3) improving the health-care system. Schroeder believed that the best way to address at least the first two goals was by focusing on substance abuse. Of the range of practices that this covers, he saw focusing on tobacco as one of the most effective paths to the improving the health of the American people. As mentioned, smoking was (and remains) one of the leading causes of preventable death worldwide. Yet, apart from the Conrad N. Hilton Foundation, there were not many other foundations working on this issue. There was a growing expectation that smoking rates would continue to drop steadily. But, at the same time, nothing much was being done to ensure that this actually happened. While there was no concerted action, there had been individual initiatives. Both government and nonprofits had made forays into the tobacco use field, including work by Americans for Non-Smokers Rights, a California state increase in excise tax on tobacco in the late 1980s, and a federal government ban on smoking on domestic airline flights of 6 hours or less. By 1990, the National Cancer Institute (NCI) was making grants to states to promote tobacco control policies and public health initiatives. The Centers for Disease Control and Prevention (CDC), American Cancer Society (ACS), American Lung Association, and American Heart Association (AHA) were all doing something in this area, but funding was inadequate and there was little coordination. After long and careful consideration, Schroeder decided to put out a proposal for a program on curbing substance abuse – including tobacco use – to the RWJF board. Persuading the board was not easy. Many board members saw this as too big a challenge, given that smoking was a legal and hugely profitable industry. This was, by its very nature, also a highly political and controversial issue. The tobacco industry had considerable influence, not least on policymakers in Washington, DC. The initiative would be met with particular opposition by representatives from the southern states, many of whom received donations from tobacco industries. Some of the board’s biggest concerns were whether the foundation would have enough money to take on the Tobacco Institute, as well as whether it had the necessary knowledge, networks, and influence. In addition, there were fears that involvement in this issue would damage the J&J reputation. Although the senior team was divided, some were interested in pursuing this idea. A point firmly in favor of involvement was the foundation’s strong position as a financially independent organization with an assured income and a vested interest in health. It could afford to be unpopular and could also afford to hire some of the best lawyers and experts to defend against potential threats. Moreover, the timing seemed appropriate – the tide had already started to turn against the industry. If the foundation could not take on the tobacco industry, who could?

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Schroeder put his plan to the board. Half the board agreed, but the rest remained skeptical: the vote concluded in an 8:8 tie. Unwilling to give up on his idea, Dr. Schroeder worked to revise his proposal with one of the board members. After speaking with his predecessor, he came up with a compromise: the focus was to be on underage smoking. Since youth smoking was illegal, it would be difficult to make a case against this. Rather than trying to enforce stricter regulations on legal smoking and “interfere” with the “free market,” a focus on youth smoking would be less controversial because it was already illegal. The aim would be to make the existing ban more effective. In 1991, the board finally agreed to the program. With the support of Nancy Kaufman, who was hired as vice president that same year, Schroeder and his team embarked on a long-term fight against tobacco use.

Design and implementation The initial prerequisite of the board to restrict grantmaking to underage smoking was lifted after the first year of the program in 1992. This opened the door to the many other initiatives that the staff pursued in an incremental and opportunistic approach. There was no master plan, nor was the amount of available funding fixed from the beginning, as it was for the work RWJF pursued on child obesity after the tobacco use programs ended ( Schroeder 2017). Over the lifetime of its tobacco work, RWJF undertook or supported 30 major projects designed to combat tobacco use. It used a multi-step, coalition-based strategy, beginning with research programs on tobacco addiction and the relative effectiveness of state and federal policies on tobacco use prevention. Next, it worked together with stakeholders (such as the American Medical Association) to build a coalition of supporting organizations. This put the foundation in a strong position to advocate for stricter state tobacco controls. The next phase was a tactical leadership and communications strategy involving media campaigns and research dissemination on a national and international scale. In the final two phases, RWJF worked on promoting effective approaches to smoking cessation and empowering minorities ( Schroeder 2017). RWJF’s key decisions throughout its work on tobacco are outlined in the following ( Grob 2011): • • • • • •

Commitment – take on tobacco as a major activity focus. Research – base all of RWJF’s tobacco-related work on research. Collaboration – collaborate with other advocacy stakeholders. Advocacy for state tobacco control policies – support, promote, and facilitate the work of grassroots groups in states to advocate for tobacco control policies. Tactical leadership and communications – create a public “voice” to counteract that of the tobacco industry and to support federal- and state-level advocacy efforts. Smoking cessation treatment – fund tobacco-cessation research and implementation projects to help tobacco users quit.

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Empowering minorities – enhance the role of minority organizations in tobacco control. Focus areas – focus on tobacco-cessation treatment and insurance coverage for treatment, excise taxes, smoke-free indoor air laws, and nationwide protections. Results – aim for the bottom line: reduced tobacco use and longer, healthier lives. Moving forward – phase out tobacco work while sustaining a modest presence in the field.

Over the course of nearly 20 years, RWJF had to navigate a risky political landscape, as its advocacy for state-control policies did not go unnoticed by corporate interests. The tobacco industry launched several attacks on the foundation, including challenges to its tax-exempt status and subpoenas to its records, causing numerous grantees to testify in industry lawsuits (Boucher 2001). When states began pursuing litigation against the industry in the mid-1990s, Schroeder was asked to be a part of the negotiations with the major tobacco corporations. However, he and many other anti-smoking advocates felt that the settlements did not go far enough to curtail the tobacco industry’s power ( Schroeder 2004). Moreover, Schroeder felt that sitting at the negotiating table with the industry was not the right action for the foundation. Although the foundation was not directly involved with any aspect of the settlement, its grantee the Campaign for Tobacco-Free Kids worked with the state attorneys to negotiate the settlements and cooperated with the White House to put public health issues at the forefront of the debate. Although RWJF took all the necessary precautions to abide by the law and was careful not to overstep any political boundaries, it was not wholly insulated from the powerful interests behind the tobacco industry. However, this was a risk that the foundation was willing and could afford to take.

Outcome and impact Given that the tobacco use programs were based on broad coalitions working on cumulative projects in a volatile political environment over the span of about twenty years, it is impossible to attribute results to any one of RWJF’s grants or partners. The foundation itself admits, “[I]t is not possible to categorically attribute or allocate a fair share of the results of their combined efforts to RWJF or to any of the leading tobacco control funders and advocates” ( Center for Public Program Evaluation 2011: 2). For this reason, the program evaluation that was conducted focused on the results of the combined efforts. In terms of RWJF’s contribution, the focus was on investment levels, the nature of contributions, and leadership styles (Center for Public Program Evaluation 2011). When the programs began, the mentality was less about creating attributable results than the idea that “this is the kind of work we ought to be doing – let’s hope it helps” ( Schroeder 2017). Over time, it became clear that RWJF was an important part of the changes that took place. Despite issues of attribution, the

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tobacco programs at RWJF are now frequently cited as a positive example of impactful philanthropy ( Schroeder 2017). In 2001, the Center for Public Program Evaluation (CPPE) did an overall assessment of the programs. Several reports sought to analyze the extent of RWJF’s impact and summarized the efforts of each project. According to CPPE, the tobacco use programs contributed to several major achievements, including ( Chaloupka et al. 2011): • • • • •

A reduction in the portrayal of smoking in movies and on television (The PRISM Awards) Widespread adoption of clean indoor air ordinances in US communities (SmokeLess States: National Tobacco Policy Initiative) A decline of smoking rates among adults from 25.5% in 1993 to 20.6% in 2009 A drop from 36% in 1997 to 19.5% in 2009 among young smokers 5.3 million fewer people smoking, and 60,000 smoking-related deaths avoided by 2010, thanks to smoke-free indoor air policies and higher state and federal excise taxes

A point to consider is that the rate of cigarette use among adults was already in steady decline as early as the mid-1960s, thus the timing of the program was favorable to positive results ( Center for Disease Control and Prevention 2016). The preexisting decline was a result of a combination of forces that had contributed to a shift in social norms and a better awareness of associated health risks. Schroeder’s own comment on the foundation’s role in the overall movement against tobacco use is “If you want attribution you need to work on a very small issue in which you can be dominant. The Board knew this was the right thing to do – even if the results were not easily attributable” ( Schroeder 2017).

Ambiguity and benign fallibility Overcoming skepticism, weak incentives, and risk When RWJF began its tobacco campaigns, no other major health foundation was working on this issue. Given that tobacco was the leading cause of preventable death, this lack of action puzzled and frustrated many tobacco control advocates. Schroeder suggests that this could have been the case because smoking was most prevalent among lower socioeconomic groups, and board members tended to be somewhat insulated from the issue ( Schroeder 2017). Moreover, lifestyle-related health problems were more stigmatized than other health issues. The largest barrier, however, was going up against the powerful tobacco industries and risking the reputation of the foundation. Given these factors, RWJF lacked strong incentives to take on one of the biggest health-care epidemics in the US, in spite of being the wealthiest health- and health-careoriented foundation.

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Knowing that RWJF was in a good position to take on this problem, the former director pushed and ultimately won the trust of the board. Although various other groups – including the NCI, CDI, and AHA – had been active in the field, the moral and reputational capital of the Robert Wood Johnson Foundation helped eliminate some of the stigma of substance abuse and “lent [the issue] some prestige,” opening the door to more leadership and activism going forward ( Schapiro 2003: 9). The foundation was able to overcome its initial inertia and weak receptiveness to signals regarding substance abuse thanks to strong leadership and a dedicated team of professionals.

A bottom-up approach to management One of the importance ways in which RWJF was able to avoid major conflicts or misaligned incentives between the board and the staff, on the one hand, and the staff and grantees on the other, was by creating an inclusive governance style. For example, staff members were invited to attend board meetings and had an open line of communication. The director of the tobacco use programs kept his staff motivated and engaged by giving them the freedom to assert themselves and present their ideas to the board and allowing them to pursue their own proposals. It should be noted that the staff was already highly professionalized, which made it easier to have a more hands-off management style. RWJF’s strong financial position allowed the team to grow and made it possible to recruit more senior specialized staff ( Schapiro 2003: 14). What are some of the short and longer-term pros and cons of having more specialists than generalists and taking a hands-off approach to management? Why did this work well for Pew? The relationship to grantees was overwhelmingly positive, as the foundation sought to guide and empower them without wanting to “steal the show.” As part of the program’s evaluation, one of the foundation’s collaborators claimed that “RWJF staff genuinely regarded themselves as resources to the grantees for solving problems” ( Center for Public Program Evaluation 2011: 33). A major goal was to bring the tobacco control movement together while working in the background, although there were unavoidable tensions within the public health field when the Campaign for Tobacco-Free Kids helped prepare the negotiation for the Master Settlement Agreement.

An incremental, multipronged, and long-term approach A key strategy to handling the tall order of altering human behavior was to work in an incremental and multipronged way over a long period of time. This made it possible to make medium-term evaluations, learn which approaches were most

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effective, make necessary course adjustments, and pursue new funding opportunities that fit with the foundation’s tactical changes. Continuous research and analysis allowed the foundation to pick up on signals more easily and learn which levers it needed to pull at which moment. The complexity of the issue demanded a combination of approaches, including strategic communication and support for grassroots movements and educational programs, which created a strategy that was greater than the sum of its parts. The states that employed this approach were most successful in curtailing the industry, and this approach was found to be more effective than law enforcement in preventing illegal sales to minors (Diehl 2003: 18). As one of the wealthiest foundations, RWJF also had the resources and annual budget to make considerable investments on a year-to-year basis. During the span of the programs, the foundation’s assets grew from $2.5 billion to $8 billion ( Schapiro 2003: 1). This allowed the foundation to pursue a diverse set of strategies and to fund very large programs without being accused of stealing resources from the foundation’s other line of work on health care ( Schapiro 2003: 5).

Money isn’t everything When RWJF began its tobacco use programs in 1991, 27.5% of students surveyed had smoked one or more cigarettes during the 30 days prior. This number increased steadily until 1997 (reaching 36.4%), after which it slowly began decreasing again (Center for Disease Control and Prevention 2016). It was also in 1997 that RWJF increased its spending on tobacco use programs by over $20 million. It was not until 2003, however, that numbers reached levels below the 1991 rates. This was also after two years of elevated spending by RWJF in 2001 and 2002 of about $100 million and $82 million respectively (Grob 2011). The foundation learned that its open-ended grants and uncoordinated efforts were not enough and made significant changes to its strategy. Among other things, it put more pressure on states by publishing “report cards” that tracked progress within the pivotal focus areas and also made collaboration a prerequisite for many of its grants. The increased focus on collaboration and a shift to actionable research combined with strategic communication eventually helped bring down these rates, arguably with effects that lasted beyond the end of the program in 2010. Three years later, the smoking rate among high school students reached an all-time low of 15.7% (Center for Disease Control and Prevention 2016).

A global scope to global problems? One area in which there were differences between the board and the director was on greater international cooperation on tobacco controls, though one might argue that the challenges RWJF were up against in the US were large enough. For example, the director was interested in working with the Chinese government to host the World Conference on Tobacco or Health in Beijing (China has the highest rate of smokers per capita worldwide) ( Schapiro 2003: 6). Although

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RWJF attended the conference, its participation did not translate into an interest in addressing some of the international concerns. A study published in the Bulletin of the World Health Organization (WHO), a leading public health journal, shows that the rates of tobacco-related diseases are expected to shift increasingly from higher- to lower-income countries as a result of the declining smoking rates in high-income countries ( Savell et al. 2015). Although the market for tobacco products in the US is shrinking, the industry has found other ways of seeking profits. In fact, African and Mediterranean countries have seen upward trends in smoking, meaning that tobacco use has not been significantly decreasing on a global scale (AFP 2015). States that have sought to challenge invasive tobacco companies have often been threatened with lawsuits by tobacco firms claiming interference in the free market, a resort not generally open to poorer countries.8 Although the goals of RWJF were focused on the US, the tobacco corporations they were up against are global. This raises a question about the extent to which global problems merit global solutions, or at least a loose international network. Recall, RWJF’s mission is “to improve the health and health care of all Americans.” How might the foundation have addressed some of these international challenges without drifting too far from its mission?

A lack of institutionalizing and cooperation among philanthropies The end of the program was a combination of its director’s departure, the interests of new leadership, the declining smoking rates, and the looming issue of childhood obesity. In hindsight, one thing Dr. Schroeder would have done differently was to better institutionalize the tobacco programs, so they could have carried on after his departure ( Schroeder 2017). However, the foundation decided to change its focus entirely. Many of RWJF’s collaborators feared that this would lead to setbacks and would send the wrong signal about the importance of staying committed to the issue. The decision to leave this field also happened quite abruptly and caught many off guard, although the foundation eventually made transitional arrangements ( Center for Public Program Evaluation 2011: 40). One factor that could have helped mitigate the void that RWJF left upon its exit would have been the involvement of other large foundations. One of the major lessons the tobacco control team learned was that cooperation between national philanthropies is often quite challenging because of major differences between their boards, staff, organizational cultures, procedures, and rules. Throughout the tobacco use programs, RWJF was more successful working with smaller foundations than with larger ones ( Schapiro 2003: 5). As in company mergers, there are high transaction costs associated with collaboration among large foundations that create barriers to cooperation. What measures could RWJF have taken to reduce the transaction costs of cooperating with other large and well-established foundations?

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Conclusion This case has followed the evolution of a series of programs over the course of nearly 20 years in a highly volatile and complex environment. The foundation led, coordinated, and facilitated an initiative on both the local and national scale and created synergies between many existing movements thanks to a proactive and empowered staff. It demonstrates the importance of research as basis for work and the need for constant adaptation in light of changing circumstances. A major strength of the foundation was its early and continuous work on the issue and its independence and strong financial position as defense against potential threats. Critical components of turning around initial setbacks were a stronger focus on strategic communication and more action-oriented results. As in several other cases, it is difficult to attribute any single outcome of the various programs to the foundation. In spite of issues related to attribution and indirect effects, the foundation took a huge risk in deciding to take a stand against the tobacco industry and having done so remained firm in its belief that this was the best approach to safeguarding the health of Americans.

Study questions 1) 2)

3)

4)

What were some of the key tactics the foundation used in its challenging quest of changing human behavior vis-à-vis a legal substance? One of the main challenges of the tobacco campaign was keeping a distance from direct political involvement. What approaches did RWJF use to do so? The vote within the board on whether to pursue substance abuse came out as a tie. Pretend you are the tie-breaker, and weigh the pros and cons of going after the tobacco industry. What factors would you take into consideration? Discuss some of the advantages and disadvantages of taking a flexible and incremental approach. Why might the foundation have opted to do this for the tobacco campaigns and not on the child obesity program that followed?

References case 5 AFP. (2015, March 12). Study Paints Mixed Picture of Global Smoking Trends. Retrieved 23 February 2018, from www.businessinsider.com/afp-study-paints-mixed-pictureof-global-smoking-trends-2015-3 Boucher, P. (2001, February 26). Rendez-vous with . . . Nancy J. Kaufman. Retrieved 23 February 2018, from http://archive.tobacco.org/News/rendezvous/kaufman.html

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Centers for Disease Control and Prevention. (2016, March 30). Data and Statistics: Tables, Charts, and Graphs: Trends in Current Cigarette Smoking. Retrieved 23 February 2018, from www.cdc.gov/tobacco/data_statistics/tables/trends/cig_smoking/ Centers for Disease Control and Prevention. (2018, February 20). Fast Facts. Retrieved 23 February 2018, from www.cdc.gov/tobacco/data_statistics/fact_sheets/fast_facts/ Center for Public Program Evaluation. (2011). RWJF Retrospective Series: The Tobacco Campaigns. Princeton, NJ: Robert Wood Johnson Foundation. Retrieved from www.rwjf. org/en/library/research/2011/04/the-tobacco-campaigns-.html. Chaloupka, F., Levy, D., & Huang, J. (2011). RWJF Retrospective Series: The Impact of Tax and Smoke-Free Air Policy Changes. Princeton, NJ: Robert Wood Johnson Foundation. Diehl, D. (2003). Center for Tobacco-Free Kids, Settlement Negotiations. In S. L. Isaacs & J. R. Knickman (Eds.), To Improve Health and Health Care (Vol. 6, pp. 1–20). San Francisco, CA: Jossey-Bass. Retrieved from www.rwjf.org/content/dam/farm/books/books/2003/ rwjf37847 Grob, G. (2011). RWJF Retrospective Series: Major Programs, Strategies and Focus Areas. Princeton, NJ: Robert Wood Johnson Foundation. Iglehart, J. K. (1989). Charting a New Course: A Conversation with Leighton E. Cluff. Health Affairs, 8 (1), 191–202. https://doi.org/10.1377/hlthaff.8.1.191 NIH Office of Disease Prevention (ODP). (2017, May 1). Family Smoking Prevention and Tobacco Control Act. Retrieved 1 March 2018, from https://prevention.nih.gov/ tobacco-regulatory-science-program/about-the-FSPTCA Robert Wood Johnson Foundation. (2012a, May 4). We Started Small. Retrieved 23 February 2018, from www.rwjf.org/en/library/research/2012/05/we-started-small.html Robert Wood Johnson Foundation. (2012b, May 4). The Billion Dollar Hei$t. Retrieved 23 February 2018, from www.rwjf.org/en/library/research/2012/05/the-billion-dollarheist.html Robert Wood Johnson Foundation. (2018). About RWJF. Retrieved 23 February 2018, from www.rwjf.org/en/about-rwjf.html Savell, E., Gilmore, A. B., Sims, M., Mony, P. K., Koon, T., Yusoff, K., . . . Chow, C. K. (2015). The Environmental Profile of a Community’s Health: A Cross-Sectional Study on Tobacco Marketing in 16 Countries. Bulletin of the World Health Organization, 93(12), 851–861G. https://doi.org/10.2471/BLT.15.155846 Schapiro, R. (2003). Conversations with Steven A. Schroeder. In S. L. Isaacs & J. R. Knickman (Eds.), To Improve Health and Health Care (Vol. 6, pp. 1–21). San Francisco, CA: Jossey-Bass. Retrieved from www.rwjf.org/content/dam/web-assets/2003/01/conver sations-with-steven-a – schroeder Schroeder, S. A. (2004). Tobacco Control in the Wake of the 1998 Master Settlement Agreement. New England Journal of Medicine, 350 (3), 293–301. https://doi.org/10.1056/ NEJMsr031421 Schroeder, S. A. (2017, December 22). [Phone Interview].

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Case 6: Joseph Rowntree Charitable Trust, UK: Campaign for Freedom of Information Overview of the case This case illustrates the work of a foundation on an issue of low-medium salience where part of the aim was to increase the political salience of the issue. Interestingly, the issue’s salience varied over time partly in relation to party political electoral politics. The issue was complex and undertaken in a dynamic environment – although again interestingly the level of dynamism varied over the life of the project. The project’s style was a mix of collaboration and contestation. The foundation’s role was primarily indirect – as a funder and champion. The trust’s Quaker-based governance style allowed it to take a long-term approach to a risky investment that was built on mutual respect and trust.

The foundation In 1904, Joseph Rowntree established three trusts of which JRCT is one. Rowntree was a hugely successful chocolate manufacturer based in York, England; starting with a handful of employees, Rowntree later employed over 4,000 people. Rowntree was an active philanthropist funding adult literacy schemes, democracy and political fair play, affordable housing, and recreation facilities, as well as paying fair wages to his employees. Rowntree wanted his trusts to deal not with symptoms but with the root causes of social problems. Today, JRCT describes itself as a Quaker trust that supports people who address the root cause of conflict and injustice, challenging existing power imbalances in society to effect real change. All trustees of JRCT are Quakers, and decision-making and investment practices are based on Quaker values. In 2015, JRCT spent £5.8 million in grants in its key focus areas: peace and security, power and accountability, rights and justice, sustainable funding, and Northern Ireland. TABLE 3.6.1 The Campaign for Freedom of Information case in context

High Complexity High Salience Issue or Problem

Low Complexity

High Dynamism Conflict as dominant style

The Campaign for Freedom of Information A case of high complexity in a politicking and strategizing scenario, with changing intensity over time

Medium uncertainty

Low Dynamism

Medium uncertainty

Low uncertainty

Management and governance A key characteristic of JRCT is that it is a “trustee-led trust.” This means that all decisions are taken together by the trustees of the respective program committees

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in an open and unbureaucratic manner. After a grant proposal is submitted, the program officer writes a memo with a summary of the project, the funding history, and an assessment of how well the proposal fits JRCT’s programs and goals. Following this, the trustees either immediately reject the proposal or explore it further within the committee, together with the staff. Finally, a meeting takes place between the trustees/staff of the responsible program committee and the prospective grantee. For larger grants, the committee discusses their decision with the entire group of trustees (List 2011: 3).

Description of the specific program The Campaign for Freedom of Information (CFoI), founded in 1984, was consistently funded by the Joseph Rowntree Charitable Trust (JRCT) from 1989 on. Before the Freedom of Information Act (FOIA) was introduced in 2005, the British public sector was not legally obliged to make any information or documents accessible to citizens, businesses, or the media (The Guardian 2009). Not only did the campaign succeed in influencing the British government to introduce the Freedom of Information Act (FOIA), it also played an important role in improving the initially weak bill. Even after the FOIA was introduced, the CFoI continued to campaign for more extensive and far-reaching information rights. To this day, CFoI gives advice to the public as well as public authorities on how to use the FOIA (CFoI 2018).

Origins and rationale JRCT’s financial support for the CFoI was inspired by a couple of significant events that occurred in the two years prior to 1989. First, the sale of the chocolate manufacturer Rowntree Company to Nestlé increased the resources of the trust, which had significant investments in the company. Second, Trustee Grigor McClelland called on JRCT to protect, bolster, and renew democratic processes in the UK following Margaret Thatcher’s election to a third term of office in 1987. It was feared that her re-election would lead to an erosion of consensus politics ( List 2011: 2), an emasculation of local government, a politicization of the senior civil service, and the suppression and distortion of official information. Moreover, it was thought that the growth of quasi-autonomous non-governmental organizations (quangos) would result in patronage through “elective dictatorship” ( Davies 2004: 276). The year following Thatcher’s election, JRCT commissioned a mapping study to determine what was already being done in that area and identifying potential partners (List 2011: 2). The goal was to combine short-term, achievable aims on a small-scale and long-term activity to change the climate of opinion on the impact of migration on British society. In 1989, JRCT created a new grantmaking program titled “The Democratic Process and the Abuse of Power.” The aim of this program was to ensure continuation of the UK’s consensual style of politics, in the absence of a written constitution, in order to uphold the rights of the citizens and strengthen the democratic process (List 2011: 3). One of the first grant recipients of the Democracy Programme was the

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Campaign for Freedom of Information (CFoI). Based in London, CFoI was created in 1984 by a coalition of 25 diverse national organizations to fight against unnecessary official secrecy and for an effective Freedom of Information Act (List 2011: 5).

Design and implementation The Campaign for Freedom of Information was a nonprofit organization unaffiliated to any political party. Only two staff members worked on the campaign: Maurice Frankel, the director (since 1984), and Katherine Gundersen (since 1999) (CFoI 2018). In 1989, the CFoI received its first £29,000 grant from JRCT. In the first year, the goal was to hire experienced researchers to focus on the topic of information rights; for example, one strand of work explored whether the US’s FOIA was applicable to the British context. After this one-year grant, JRCT proceeded to fund the campaign with a number of larger grants over longer periods of time (List 2011: 5). Over an extended period, JRCT provided the CFoI with more than 50% of its (CFoI’s) income (Davies 2004: 277). From 1989 to 2000, the trusts only funded research activities because of the legal restrictions on charities. However, starting in the period from 2000 to 2002, a change in the regulatory approach allowed JRCT to fund core activities of the campaign as well (List 2011: 6). Early setbacks in the attempt to introduce FOI legislation led the CFoI to take an incremental approach to attaining goals. Rather than going for comprehensive legislation, it aimed at gaining FOI legislation in specific policy areas (e.g., personal files and medical records). This strategy led to several wins in 1987, 1988, and 1999 (as outlined in the section on outcome and impact) (Thümler 2017: 129). A further strategy the campaign used was to build an advocacy group that could remain committed to the cause during highly politicized periods. To this end, the CFoI recruited supporters from various likely and less likely groups and political parties and created an award for individuals who contributed significantly to their cause. Staff lobbied government representatives and MPs, tried to convince civil servants, and networked with other nonprofit organizations. One of earliest high-profile supporters was then MP Tony Blair, who presented the awards in 1996 (Thümler 2017: 131). Finally, the CFoI heavily invested in high-quality research and examined similar campaigns in other countries. This created a basis for briefings, draft bills, and training sessions the campaign provided for public authorities. In addition, it used its expertise to answer questions from the public and to increase the visibility of the issue. After the FOIA was finally implemented in 2005, the campaign continued to improve and defend the act, in particular by monitoring compliance with the law (List 2011: 6–7).

Outcome and impact In 1991, it looked as though success might be in sight. The first draft of the Freedom of Information Bill was introduced by the Liberal MP Archie Kirkwood – without success. After this setback, the next, incremental step forward was the introduction

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of a voluntary code of practice for public access to information. However, this was a very limited approach, and the campaign continued to press for a strong FOIA. Their work seemed finally to come to fruition in the mid-1990s when Tony Blair spoke in favor of new legislation ahead of the 1997 election (Davies 2004: 277). And indeed, after the election, the Cabinet Office, headed by David Clark, published a white paper Your Right to Know – The Government’s Proposals for a Freedom of Information Act. This paper introduced far-reaching legislation to end the “culture of secrecy” and facilitate a more open and transparent democracy (Cabinet Office 1997). However, the issue of passing FOIA became less pressing for the Labor government once it rose to power in 1997, leading to delays in its implementation. What strategies can foundations use to navigate political challenges and ensure longerterm commitments without overstepping their boundaries? Clark lost office, and the responsibility for the FOIA was transferred to the Home Office under Jack Straw. To the surprise of many, including CFoI, the Home Office published a much weaker bill in 1999. CFoI suggested that this was an “astonishing retreat from the Government’s White Paper, published only 17 months ago” ( Davies 2004: 277). The new proposal was criticized in both houses, and CFoI successfully proposed multiple amendments to the bill (CFoI 2018). Despite these efforts, a much watered-down FOIA gained Royal Assent in 2000. It included 21 exemption clauses, compared to just seven exemptions mentioned in the white paper ( Burell 1999). Furthermore, implementation of the act was delayed by more than four years (January 2005). Some critics argued that this gave public agencies the opportunity to destroy documents before the first requests for information could be made ( The Guardian 2009). CFoI concluded, “[The Bill] achieves the remarkable feat of making the code, introduced by a government opposed in principle to freedom of information, appear a more positive measure than legislation drawn up by a Government committed to the issue for 25 years” ( Burell 1999). Yet, many observers concluded that the bill would not have been passed without the continuous efforts of the campaign. In 1999, Jack Straw praised Maurice Frankel and stated that the FOIA was “the product of a brilliant campaign by the Campaign for Freedom of Information” (CFoI 2018). CFoI added that without the moral and financial support of JRCT, the campaign would have been much less influential. Nevertheless, it is difficult to claim that there would be no information legislation without JRCT, not least because freedom of information is enshrined in EU legislation and every EU member is obliged to provide citizens with access to information (Davies 2004: 278). The main achievements listed by the Campaign for the Freedom of Information are the following: • •

Access to Personal Files Act 1987 (access to individual housing and social work files) Access to Medical Reports Act 1988 (access to medical reports for employers and insurers)

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Environment and Safety Information Act 1988 (access to various enforcement notices) Access to Health Records Act 1990 (a general right of access to health records)

JRCT attributes many of these achievements along the way to the passing of the Freedom of Information Act to the “passion, determination, and remarkable communication skills” of Maurice Frankel (List 2011: 7).

Ambiguity and benign fallibility Managing weak signals When the Freedom of Information Act was passed in 2000, it was considered weak, and the government decided to put off implementation until January 2005. Following this, JRCT veered away from its typical hands-off management style and rejected CFoI’s February 2002 request for a further core grant. The foundation was at a critical juncture and had to decide whether it would stay the course despite the disappointing results. Instead of walking away from CFoI, however, JRCT suggested that Maurice Frankel take a year-long “sabbatical.” After the intensity leading up to the act’s passage in 2000, the break ended up being a boon to both Frankel and the trust. Both sides were able to come back refreshed in 2003 with a three-year plan to assist with the act’s implementation in 2005. The close relationship JRCT built with its grantee allowed the trust to better understand the needs of Frankel and to take a few steps back without breaching their trust.

Goals, performance indicators, and core support JRCT takes a hands-off approach to its grantees. A senior staff member mentioned, “We’re not into the business of setting targets and performance monitoring in a way. We’re more about providing and offering core support to people and organizations that we feel are contributing to the aims we have” (Thümler 2017: 126). Change and failure are accepted as part and parcel of the grantmaking process. Rather than expect clear targets and goals, JRCT expects its grantees to report “changes to the objectives” and “least successful objectives” (Thümler 2017: 126). The trust between JRCT and their grantee arguably allowed for this approach to thrive (albeit, some might say, at the cost of precise performance measures). Nevertheless, after supporting the campaign over the course of 15 years, one could also argue that the outcome was modest and that the UK would have had to adopt a similar law to comply with the EU’s freedom of information requirements.

A faith based-approach – no exit? Trust and understanding are important elements in JRCT’s organizational philosophy. The foundation was built on Quaker values, and to this day, the trustees

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and senior staff of JRCT are Quakers. Common values give a sense of purpose and a base for trust and mutual understanding, and this close relationship is extended beyond the foundation to grantees. These values, coupled with JRCT’s flat hierarchy, contribute to JRCT’s view of itself as a “critical friend,” empowering other organizations over the long-run, acknowledging that change often takes time and that it is difficult to judge success within an arbitrary time period; all of these, in turn, contribute to JRCT’s openness to risk and willingness to take a long-term approach to funding. Grants are awarded for up to three years but are often made repeatedly to the same organization, which it describes as “work done in faith” (Thümler 2017: 126). A deep knowledge and trust between the project partners allows for longerterm grant commitments and provides a sense of accountability. This is how JRCT became the primary funder of the Campaign for Freedom of Information from 1989, although the campaign did secure funding from some other sources over the years (i.e., the Trust for London, Indigo Trust, the Primrose Hill Trust, and individual donations).9 JRCT was encouraging the campaign to seek greater independence through trainings and consultancies. However, investing more in training would have taken away from the CFoI’s work. While the consistent support from JRCT was a critical factor to the CFoI’s work, it also risked creating long-term dependency that might be difficult to break without sabotaging the campaign. As such, one of the main weaknesses might be seen as the failure to build a stronger coalition of funders, although this could have entailed other disadvantages in managing such a coalition. What kind of resources could the trust have provided to make the campaign more financially resilient? What could have been some disadvantages of bringing in other big funders?

On the margins of legality JRCT’s mapping exercise identified the best initial grantees, and the preferred candidate was CFoI, as it already had a network and had successfully influenced passage of several acts. Supporting this campaign was risky, however, given that the campaign was intricately involved in lobbying the government. For this reason, the program was heavily criticized for the close relationship between the foundation and the CFoI. By law, charities are prohibited from engaging in political campaigns or from funding political parties. However, they are allowed to finance research that serves as an information base for political decisions. In the late 1980s, the Charity Commission criticized charities for being overly involved in left-wing campaigns. There were suggestions that JRCT was “testing the limits” of the existing charity laws. JRCT was well aware of this balancing act and made adjustments as necessary, such as shifting from core support to funding research. At the same time, they considered the CFoI as an effective lobby organization having achieved a series of pieces of legislation. Although the trust was careful to stay

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within the bounds of legality, JRCT’s reputation for working from a place of faith arguably provided a degree of protection. Moreover, its mentality of working from behind the scenes “strengthening the hands of others” allowed the trust to remain out of the spotlight.

Making controversial friends – reputational risk? It was not only the strategy of the foundation and campaign that were criticized; the FOIA itself continues to be heavily contested. Time and again, the government tried to curtail the rights of citizens by restricting freedom of information: bills were proposed to make it easier to refuse requests, to exclude parliamentary expenses, or to remove all cabinet documents from the FOIA. Each time, the CFoI successfully supported the rejection of these bills, drawing on its experience and deep knowledge of opposing political critics. Nevertheless, the FOIA remains controversial legislation. Unlike KBF, however, JRCT was willing to risk being closely associated with a political agenda, even though it is one of the most respected charitable trusts in the UK (in 2007, the chief executives of the UK’s top 500 fund-raising charities voted it as “Britain’s Most Admired Charity”). This case suggests that with enough reputation capital, the potential for damage when going down a risky path may be reduced – but reputational capital may not always be sufficient.

Conclusion CFoI demonstrates that investing in talented individuals can last many decades and even continue when the initial goals seem to slip from the grantees’ grasp; the case also suggests that a sense of pride and “doing the right thing” can go a long way. But a strategy based on long-term trust may run the risk of encouraging dependency. JRCT overcame any concerns on this score by drawing on a sense of pride that came from supporting a risky but valuable cause other foundations were less willing to embrace (List 2011: 10).

Study questions 1)

2) 3) 4)

What is the central dilemma of this case, and how does the foundation address it? What crucial factors made JRCT’s support for the CFoI a “success”? How did JRCT’s grantmaking approach help inform the CFoI’s strategy? In what sense did JRCT’s governance style allow it to take greater risks and fund grantees over the long-term? Davies (2004) writes that foundations can exercise a considerable amount of political influence by investing the right amount of money at the right moment. What strategies did the CFoI use to know when to strike?

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References case 6 Burell, I. (1999, May 25). Information Bill Attacked as Toothless. The Independent. Retrieved from www.independent.co.uk/news/information-bill-attacked-as-toothless-1095736. html Cabinet Office. (1997). Your Right to Know: The Government’s Proposals for a Freedom of Information Act. The Stationery Office Limited. Retrieved from www.gov.uk/govern ment/uploads/system/uploads/attachment_data/file/272048/3818.pdf Campaign for Freedom of Information (CFoI). (2018). About Us. Retrieved 23 February 2018, from www.cfoi.org.uk/about/ Davies, J. S. (2004). The Foundation as a Political Actor: The Case of the Joseph Rowntree Charitable Trust. The Political Quarterly, 75 (3), 275–284. https://doi.org/10.1111/ j.1467-923X.2004.00612.x The Guardian. (2009, May 18). Freedom of Information Act 2000. Retrieved 23 February 2018, from www.theguardian.com/commentisfree/libertycentral/2009/may/18/ freedomofinformation-information-commissioner List, R. (2011). The Joseph Rowntree Charitable Trust’s Support for the Freedom of Information Campaign: Are We There Yet? (CSI Research Project Strategies for Impact in Philanthropy No. Case Study CSI TC 010). Heidelberg: Centre for Social Investment of Heidelberg University. Thümler, E. (2017). Philanthropy in Practice: Pragmatism and the Impact of Philanthropic Action (1st ed.). New York; London: Routledge.

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Case 7: Mozaik Foundation, Bosnia-Herzegovina: EkoMozaik Overview of the case This is a case of a foundation adopting an innovative entrepreneurial role attempting to create a sustainable business under very difficult circumstances. The foundation was working in a moderately complex environment that was highly dynamic. The project was politically sensitive, and the potential costs of involvement were high, but, arguably, it was uncontrollable factors like severe weather conditions (i.e., floods) as much as any others that proved to be the greatest challenge with regard to building a social business based on agriculture. The foundation’s style was broadly cooperative but, given a difficult economic context, inevitably involved elements of competition in a wider market. This case differs from the others in that the foundation is still very young and in the process of building an endowment, which has proven to be more difficult than anticipated. In the end, the challenges of running a social business proved to be more challenging than beneficial, and although it satisfied one of two goals, the Foundation eventually realized it had to change course.

The foundation The Mozaik Community Development Foundation is based in Sarajevo, Bosnia, and Herzegovina (BH) and was founded in 2002 with the aim of developing an active and sustainable non-governmental sector in Bosnia-Herzegovina through education, funding research and advocacy. At the time of its founding, it was called the NGO foundation and primarily made grants and coordinated donations (Leat 2007: 53). Since then, its mission has evolved “to identify, develop and support value-driven and innovative social entrepreneurs” (Foundation Mozaik 2017: 3). As part of a major strategic planning process led by the Harvard Business School, it changed its name to the Mozaik Foundation in 2004 (Leat 2007: 53). To this end, Mozaik runs two programs: “Youth Banks” and “All Inclusive.” In addition, with the support of local and international donors, Mozaik was able to establish two social businesses: MaŠta Agency and EkoMozaik Ltd. The MaŠta Agency promotes corporate social responsibility (CSR), whereas EkoMozaik produces organic fruits, vegetables, and honey. By investing in the two social enterprises, the foundation aimed to decrease its dependence on foreign donor funds. Until 2004, Mozaik was TABLE 3.7.1 The Mozaik Foundation in context

High Complexity Low Salience Issue or Problem

Low Complexity High Salience Issue or Problem

High Dynamism Consensus as dominant style

High uncertainty

Mozaik A case of medium complexity and a support and coordination scenario

Low Dynamism

Medium uncertainty

Low uncertainty

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almost 100% dependent on foreign donation. After this, its budget increased from €0.32 million in 2004 to €0.7 million in 2008 thanks to the additional resources that were mobilized locally (Leat 2007: 54).

Description of the specific program EkoMozaik Ltd. is one of two social enterprises founded by the Mozaik Community Development Foundation. It was created in 2009 with the dual goal of providing employment opportunities to the people of the economically depressed Municipality of Sekovici in the Eastern Repubika Srpska and becoming financially self-sufficient. The Municipality of Sekovici agreed to allow EkoMozaik to cultivate the land of a former military complex free of charge for the duration of 20 years. Within a couple of years, EkoMozaik was the fastest growing organic honey producer in BH. In addition to producing honey, EkoMozaik grows organic foods and ornamental flowers and rents out agricultural equipment. The profits are reinvested into the foundation and the community. The financial objective of the social enterprise is to operate independently without external financial support or human capital, but this goal was never achieved (Babović et al. 2015). Although EkoMozaik can claim a number of achievements, it has also experienced some major setbacks (Table 3.7.2).

Origins and rationale EkoMozaik was founded primarily to create jobs. Promoting employment was a priority for Mozaik, given the high levels of poverty, social exclusion, and stagnant TABLE 3.7.2 Major developments and setbacks of EkoMozaik

2008

2009 2010 2011

2012 2013 2014

Mozaik decides to expand its work into the for-profit sector and chooses a social enterprise model. To this end, the foundation signed a three-year contract with the Czech Ministry of Agriculture. The agricultural program “EkoMozaik” is developed to focus on the production of certified organic honey. Management structures were upgraded to improve performance. Partnered with USAID for the project “Empowering Women through Organic Farming,” which led to the construction of the most modern greenhouse in the region. Seventy-five percent of greenhouses in BH were destroyed by severe weather conditions, primarily flooding. Hired a new agronomist but suffered a 20% loss; initiated negotiations with a Swedish company about a long-term partnership. EkoMozaik reduced its losses, partnered with the Austrian Development Cooperation (ADC) to help the families whose livelihoods were compromised by the floods by beginning to plant berries.

Source: Mozaik Community Development Foundation Annual Reports

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GDP growth in BH (Babović et al. 2015). The unemployment rate for the total labor force in 2009 was about 24%; the rate for women was about 27%, even higher. These rates increased over time, rising to 28% total and about 30% for women in 2013 (World Bank 2018). When EkoMozaik was founded in 2009, Sekovici had the highest unemployment rate in Srpska (Šešlija 2011). A social business might provide jobs and, at the same time, contribute to ethnic reconciliation, easing the tensions between Bosniaks, Serbs, and Croats in the former Yugoslavia. Mozaik’s need for longterm sustainability was an additional consideration in the creation of EkoMozaik. Mozaik needed to generate income in order to sustain its activities in case international funders were to pull out of the Western Balkans ( Šešlija 2011).

Design and implementation Mozaik adopted a model of social entrepreneurship, which “strives to involve residents in analyzing their community needs, identifying solutions based on available resources, developing a plan of action and implementing the plan” (Šešlija 2011). Start-up capital for EkoMozaik was provided by the Ministry of Agriculture of the Czech Republic and Sekovici, a public-private partnership. Mozaik initially provided 75% of the funding, leaving the rest to government, business, and private individuals. Today, this ratio is reversed (Šešlija 2011). In preparation to founding its social enterprise, Mozaik negotiated with the International Finance Corporation (IFC) for “in-house consulting and tailor-made training” (Mozaik Community Development Foundation 2010: 14). IFC offered to provide grants and/or loans for Mozaik’s social enterprises if it judges the process to be successful, while Mozaik agreed to pay 50% of all the consulting costs. IFC provided guidance on how to attract new investors, expand production, and create additional jobs via the construction of a greenhouse for lavender and vegetables (IFC 2017). The first phase of the project (2005–2008) focused on introducing corporate governance concepts and the second phase (2009–2011) on working with specific companies and public sector institutions to improve performance ( IFC 2017).

A strategic partner – the Mott Foundation The Charles Stewart Mott Foundation first became involved with the Mozaik Foundation in the early 2000s through the relief agency CARE, which has an office in Bosnia and Herzegovina. Zoran Puljic, the founder of Mozaik, initially worked out of this office and received a $30,000 grant from Mott for project support. The Mott Foundation, in partnership with Care International, is one of Mozaik’s strategic partners that helped build the capacity of the NGO foundation (Mozaik Community Development Foundation 2002: 8). Among the other main donors at the time of Mozaik’s founding were CIDA, the King Baudouin Foundation, Freedom House, and the Open Society Foundation (Mozaik Community Development Foundation 2002: 2).

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The initial idea was that the foundation would act as a hub for international donors with the expectation that donors would be leaving the country and could make departing gifts to the NGO foundation, which would then re-grant funds based on local needs. However, fewer foundations departed than expected, and the foundation never managed to build a strong base of funds. Nevertheless, the Mott Foundation wanted to build the grantmaking capacity of Mozaik by transforming it to a private foundation. Since the 1980s, Mott had had a civil society program for Central and Eastern Europe and recognized the value of supporting a foundation that would strive to develop the NGO sector in Bosnia and Herzegovina. Mott continued its support of Mozaik in 2004 with a general-purpose grant. This funding was used in large part for technical assistance on building an endowment, for example by helping pay for a consultant to assist Mozaik with developing fund-raising strategies. Other advisors, such as Deloitte, worked pro bono to assist with these efforts as well. An important factor for Mott was that Mozaik would eventually catch the interest of funders within Bosnia and Herzegovina, but it also knew that this would be a long-term process. In the meantime, Mott provided grants for other initiatives and needs as well. From 2003 to 2004, it supported the Fund for Local Initiatives, which allows communities to identify and resolve local problems (i.e., infrastructure, health care, and environmental degradation) in partnership with other NGOs, government officials, media, and businesses. In 2005 and 2006, it granted Mozaik €64,904 and €57,915, respectively, for Mozaik’s social justice and inclusion initiative, “Program Plus” (Mozaik Community Development Foundation 2006). In 2010, Mott helped fill a funding gap by increasing Mozaik’s general support grant by $22,000 when a contract with the delegation of the EU to BH was delayed and Mozaik had to cover HR costs from its own funds (Mozaik Community Development Foundation 2011: 10). While these contributions had a high social value for the local community, Mozaik was still far from achieving financial independence. In 2012, Mozaik began working on efforts to build an endowment (Mozaik Community Development Foundation 2013: 2). To this end, Mozaik developed a communication strategy with the hope of sending a strong message to local citizens and businesses about supporting its endowment building campaign (“M-Fund”). In spite of political and environmental turmoil, Mozaik managed to raise $25,000 by 2014. The Mott Foundation offered to provide a two-to-one matching fund if Mozaik managed to raise $250,000 on its own by December 2016. However, by January 2017, the endowment fund was still short $100,000, so the deadline was extended to December 2017 ( Foundation Mozaik 2017: 28). According to the director of Mott’s civil society work, the matching fund only worked out marginally well. By the end of the five-year grant period, Mozaik had managed to raise $200,000 in funds – totaling $600,000 after the matching funds. This was far from the $5 to $10 million goal the foundation had envisioned. In the end, the concepts of “civil society” and “philanthropy” did not resonate strongly with local funders. Mozaik learned that it would need to take a different approach and turned to a new project on social entrepreneurship. This built on its existing

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Youth Bank program and was rolled out in 20 to 30 municipalities. Thus, Mozaik transitioned to working more as an impact investor in social projects that would assist local communities more directly via job opportunities. Mozaik will not be receiving any more grants from the Mott Foundation going forward. This is due to a shift in strategy within Mott whereby it is phasing out its civil society work in Eastern Europe. Instead, it will focus on three new themes: 1) civil space, 2) community philanthropy, and 3) access to justice (primarily in South Africa). It has provided the Mozaik Foundation with a parting grant of $250,000 for the years 2017–2018. In addition to making a final grant, how could Mott prepare Mozaik for greater independence? The Mott Foundation never conducted a formal evaluation of its grants to Mozaik, but it is aware of several shortcomings with its strategy of assisting Mozaik with building an endowment. Not only was this a challenge in terms of keeping up with overhead costs, but there is also not a strong tradition of endowed foundations in the Balkans. Local donors often did not understand the value of this and were reluctant to provide funds for something that did not have an immediate impact. However, the director of Mott’s Civil Society Program claims (this was from a phone interview) that the model of an endowed foundation need not be exported to difficult contexts for a foundation to engage in impactful work. On the contrary, he says, it is important to be open to different foundation models. As an active member of the European Council on Foundation, Mozaik acts as important counterexample to the endowed foundations (Veirs 2018).

Outcome and impact In terms of Mozaik’s dual-goal structure of reconciling ethnic divisions and creating economic opportunities at the same time, the results are mixed. While the social value was strong, the project did not prove to be economically sound. As a result of EkoMozaik’s work to mitigate political challenges by working across the political factions, the two local political parties cooperated for the first time (Leat 2007). A joint and vested interest in EkoMozaik and a need for employment motivated both sides to work together, for example to maintain the track that provided access to the fields and greenhouses. By 2012, Mozaik and EkoMozaik had provided employment and living wages to 181 residents and had encouraged gender equality by empowering women to become more economically independent ( Foundation Mozaik 2013). However, the social enterprise itself never managed to become financially selfsustaining as Mozaik had intended, and EkoMozaik even lost access to its land following municipal elections (Veirs 2018). After several years of losses, the Mozaik Foundation is considering giving up its social business to a commercial enterprise. Instead of running the social business on its own, it would be an investor and ensure that the purpose remains social.

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EkoMozaik also played an important tertiary role in crisis management after floods devastated much of the country in 2014. EkoMozaik distributed half of its vegetable seedlings to farmers who had suffered major losses. It also installed LifeSaver plants for water purification in Sekovici and helped reconstruct devastated roads and buildings (Sarajevo Times 2015). This was not part of Mozaik’s broader goal structure but rather an ad hoc response to a crisis. Thanks to the many social gains Mozaik brought to the local community, the foundation has been recognized for its social enterprise (SE) model by the Schwab Foundation for Social Entrepreneurship (2010 ) and won Microsoft’s Regional YouthSpark Award (2013) for its work with youth. It has also received accolades from the Davos World Economic Forum and the Sarajevo Business Forum. Mozaik provides an annual overview of its achievements in its annual reports, including the number of community initiatives, the amount of funds that were re-granted, the number of registered volunteers, and the hours worked. Based on these contributions, Mozaik considers itself “a national leader in local resource mobilization” (Mozaik Community Development Foundation 2010: 3).

Ambiguity and benign fallibility Unrealistic expectations Starting a business in the economic and socio-political context of Bosnia-Herzegovina was challenging. Civil society organizations largely depended on foreign donors, and local communities were very much dependent on the state. Foreign investment met some of the needs but did not reach all parts of the country or make up for the lack of local initiatives (Schwab Foundation 2018). The structure of the national government was also complex and overlapping, which led to delays in aid distribution. For instance, in 2013, the ethnic divisions within the country, composed of the Serb Republic and the Federation of Bosnia and Herzegovina prevented an agreement on how to manage and distribute EU pre-accession funds (IPA). Although the EU required a streamlined distribution mechanism, both regions insisted on managing the funds independently of each other (Reuters 2013). The entire premise for creating the Mozaik Foundation was well-intentioned but based on the mistaken belief that there would be an increased investment in civil society following the end of the war. The lack of both civil society and an established culture of philanthropy made it virtually impossible to build an endowment, although the foundation was provided with strong incentives by Mott to do so. In the end, there was a sense that this was an unrealistic expectation for the context of Bosnia and Herzegovina and carried too much of a US cultural bias. Could Mott and other US funders have taken a less paternalistic and more empowering approach to their grantmaking and, if so, how?

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Sustaining adversity – when is it enough? Free use of the former barracks proved a mixed blessing. The site is high up in the mountains and hard to reach, making it difficult to get basic equipment to the business. The remote location also made it difficult to find nearby staff and significantly increased transportation costs (Leat 2007). Other issues concerned difficulty recruiting personnel in such a remote area. Yet another challenge was the fact that beekeeping and harvesting vegetables are not a steady or reliable source of income. Fresh produce has a very limited shelf life, supply and demand fluctuate, and the weather takes its toll. To make matters worse, there was a low market demand for EkoMozaik’s goods. There was a growing local food market and a trend toward home-grown foods (Leat 2007). This forced EkoMozaik to export its total production of berries to the international market (Babović et al. 2015). Cultivating the land in this part of the country was also more difficult than the foundation anticipated, and severe weather conditions led to various costly setbacks. Having survived exceptional snowfall that threatened to break the greenhouse roof, EkoMozaik suffered great losses during the floods in 2012 and later in 2014. Its greenhouse was completely destroyed by strong winds in March 2015, shortly before EkoMozaik was ready to produce 1.12 million vegetable seedlings (Foundation Mozaik 2016). These factors have contributed to EkoMozaik’s failure to become a totally selfsustaining business. An ongoing dependence on donors allowed the foundation to overlook some of the signals that were indicating that the social business was largely failing at least on one account – profitability. However, working under such adverse circumstances arguably contributed to the second goal of bringing the staff (and thereby different ethnic groups) closer together, even if the goal of becoming self-sustaining failed. Could Mozaik have anticipated any of these difficulties? Was it better to accept the unknown and find creative solutions ex post rather than limiting the scope of its work ex ante?

Conclusion This case is somewhat of an outlier but demonstrates how well-intentioned goals in the absence of a clear understanding of contextual challenges (on behalf of foreign donors) and business principles (on behalf of the social enterprise) can lead to inertia with regard to strategies that are only met with qualified success. The social business was propped up by financial inputs from the foundation and external donors, which partially masked the fact there was low demand for the products being sold, at least locally, and that the remoteness of the area led to unanticipated costs in terms of finding qualified staff and overcoming natural disasters. It did, however, succeed in providing economic opportunities to the local community and building bridges between the divided ethnic communities.

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Study questions 1) 2)

3)

How does Mozaik’s failure to build an endowment represent benign fallibilities both on behalf of Mozaik and Mott? Mozaik transitioned from a re-granting foundation, to an independent foundation, and now to a social enterprise working on local development. What are the strengths and weaknesses of these approaches? The foundation had to navigate several challenges, including unexpected weather conditions, a challenging political context for entrepreneurs, and a weak culture of giving. How receptive was Mozaik to signals from the environment and to what extent did these shape its decisions?

References case 7 Babović, M. (2015). Strategic Study on Social Economy Development in the Context of the South East Europe 2020 Strategy. Belgrade: European Movement in Serbia. Foundation Mozaik. (2013). EkoMozaik Ltd. Retrieved 24 March 2016, from www. mozaik.ba/en/drustveni-biznisi/eko-mozaik Foundation Mozaik. (2016, March 14). Otvoreni Javni Poziv. Retrieved 21 April 2016, from www.mozaik.ba/en/vijesti/item/267-nakon-prirodne-katastrife-osigurali-alter nativne-proizvodne-kapacitete/267-nakon-prirodne-katastrife-osigurali-alternativneproizvodne-kapacitete Foundation Mozaik. (2017). Annual Report: January 1st–December 31st 2016. Sarajevo. Retrieved from http://mozaik.ba/wp-content/uploads/2017/08/Mozaik%20Foundation%20-% 20Annual%20Report%202016%20final.pdf International Finance Corporation (IFC). (2017). IFC in Europe and Central Asia. Retrieved from www.ifc.org/wps/wcm/connect/region__ext_content/regions/europe+middle+ east+and+north+africa/ifc+in+europe+and+central+asia/news/feature+story+ eca+-+improving+corporate+governance+in+southern+europe Leat, D. (2007). Just Change: Strategies for Increasing Philanthropic Impact. London: The Woburn Place Collaborative. Mozaik Community Development Foundation. (2002). Annual Report 2001. Sarajevo. Retrieved from http://mozaik.ba/wp-content/uploads/2017/03/Annual_Report_2001.pdf Mozaik Community Development Foundation. (2006). Annual Report for 2005. Sarajevo. Retrieved from http://mozaik.ba/wp-content/uploads/2017/03/Annual_Report_ 2005.pdf Mozaik Community Development Foundation. (2010). Annual Report: January 1st–December 31st 2009. Sarajevo. Retrieved from http://mozaik.ba/wp-content/uploads/2017/03/ Annual_Report_2009.pdf Mozaik Community Development Foundation. (2011). Annual Report: January 1st–December 31st 2010. Sarajevo. Retrieved from http://mozaik.ba/wp-content/uploads/2017/03/ Annual_Report_2010.pdf Mozaik Community Development Foundation. (2013). Annual Report: January 1st–December 31st 2012. Sarajevo. Retrieved from http://mozaik.ba/wp-content/uploads/2017/03/ Annual_Report_2012.pdf

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Reuters. (2013, September 10). Bosnia Loses EU Aid for Agriculture Because of Politicking. Reuters. Retrieved from www.reuters.com/article/bosnia-eu-funds/bosnia-loseseu-aid-for-agriculture-because-of-politicking-idUSL5N0H63W620130910 Sarajevo Times. (2015, March 13). ‘EkoMozaik‘ Will Soon Plant 850.000 Seedlings of Vegetables. Sarajevo Times. Retrieved from www.sarajevotimes.com/ekomozaik-willsoon-plant-850-000-seedlings-vegetables/ Schwab Foundation for Social Entrepreneurship. (2018). Zoran Puljic. Retrieved 28 February 2018, from www.schwabfound.org/content/zoran-puljic Š ešlija, K. (2011, June 23). Beekeeping in Bosnia. Retrieved 28 February 2018, from www. mott.org/news/articles/beekeeping-bosnia-provides-more-than-honey/ Veirs, W. (2018, January 5). [Phone Interview], Charles S. Mott Foundation, London. World Bank. (2018). World Development Indicators | DataBank. Retrieved 28 February 2018, from http://databank.worldbank.org/data/reports.aspx?source=2&country=BIH& series=&period=#

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Case 8: William and Flora Hewlett Foundation, US: Neighborhood Improvement Initiative Overview of the case This case concerns a foundation working on a complex, poorly understood issue in three disadvantaged communities in the Bay Area of California. The issue was of medium complexity, but it was not politically contentious in the sense that the goal was not one to which anyone could object. There was a degree of instability at both the foundation level and at the local level. The foundation’s role was indirect in that it worked through managing partners – but at the same time direct in that it retained control over goals and ways of working in the three areas. The foundation’s style was, in theory, to build coalitions and consensus. Arguably, a lack of flexibility, combined with an under-developed theory of change, contributed to the somewhat poor outcomes (Table 3.8.1). These were particularly ambiguous given the difficulty in tracking performance and changing the evaluation strategy mid-project.

The foundation The foundation was established in 1966 by Hewlett Packard co-founder William Redington Hewlett and his wife, Flora Lamson Hewlett, to support liberal and progressive causes. By 2016, the foundation had assets of $9 billon and was the fourth largest foundation in the US, distributing $419 million in grants. It focuses on education, environment, global development, performing arts, and philanthropy. More recently, it has developed initiatives on the polarization hampering the effectiveness of the US government and the complex political challenges of cyber security. This case here concerns an initiative for neighborhood improvement undertaken in the late 1990s.

Description of the specific program The Neighborhood Improvement Initiative (NII) was founded to improve the lives of three underserved communities in the Bay Area – West Oakland, East TABLE 3.8.1 The Neighborhood Improvement Initiative case in context

High Complexity

Low Complexity High Salience Issue or Problem

High Dynamism Consensus as dominant style

High complexity

Neighborhood Improvement Initiative Medium to low uncertainty A case of low to medium complexity in a support and coordination scenario

Low Dynamism

Medium uncertainty

Low uncertainty

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Palo Alto, and the Mayfair area of East San Jose. The goal was to achieve tangible improvement for residents and to strengthen the long-term capacity of the community foundations and neighborhood organizations to sustain change (Brown and Fiester 2007). Three community foundations were chosen to serve as managing partners, and over the span of the project, the Hewlett foundation committed over $20 million. In order to achieve community change, the foundation needed to develop neighborhood leaders, organizations, and networks that would support the residents and connect them to resources within and outside of the community (Brown and Fiester 2007: xi). NII began with the following goals (Brown and Fiester 2007: i): • • • • •

Connect fragmented efforts to address poverty-related issues in select communities Improve the capacity (proficiency and resources) of participating communitybased organizations Improve Bay Area community foundations’ capacity to support neighborhood improvement Develop neighborhood leaders by creating a vehicle for increasing resident involvement in neighborhood planning and improvement strategies Leverage significant public and private resources to support community improvement

While there was no articulated theory of change, the foundation worked on the assumption that improvement in the physical, social, and economic conditions in lowerincome neighborhoods will result from the active involvement of residents in community planning and decision-making processes, in combination with a comprehensive, coordinated, multi-year strategy to address the problems that impair the quality of life in these neighborhoods. (Brown and Fiester 2007: iii)

Origins and rationale The long-term goal of the initiative was to “provide long-term statistical evidence of changes in poverty indicators” (e.g., unemployment, welfare dependency, and vacant and abandoned structures) (Brown and Fiester 2007: ii). It was born from the belief that the condition of underserved communities would improve if more residents were actively involved in decision-making processes and community planning. With the help of a consultant, the foundation selected Mayfair (1996), West Oakland (1998), and East Palo Alto (1999) as its three sites for investment. These neighborhoods were selected based on a combination of factors that include poverty, failing schools, and substandard housing. The three locations varied in terms of demography but had all suffered from gentrification due to the dot-com expansion.

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Design and implementation Key elements of the foundation’s approach were the involvement of local residents through civic engagement, the creation of a neighborhood-based institution to serve as an intermediary, and an effort to connect existing as well as future neighborhood improvement activities to developments in the larger region. What is more, the basic design of the initiative involved six parts: a resident-driven process during the first year; an implementation phase in each of the three sites supported by grants, technical assistance, and training overseen by a neighborhoodbased lead organization for a period of six years; local, cross-sectoral advisory committees; a partnership with local community foundations; a data collection and tracking system for each site; and a multi-site implementation evaluation (Brown and Fiester 2007: ii). Local community foundations served as partners for the project and were responsible for the management of each site. Their work included identifying the local lead agency, helping the lead agency implement the neighborhood improvement plan with local residents, and managing the advisory committee. The three managing partners for the project were the Community Foundation of Silicon Valley (CFSV) in Mayfair, the San Francisco Foundation (TSFF) in West Oakland, and the Peninsula Community Foundation (PCF) in East Palo Alto. A change in leadership at the Hewlett foundation in 2001 led to a shift from a process- to a result-oriented approach. For this reason, Hewlett used an “explicitly outcomes-based framework” starting that same year. Included were “restructuring around a small number of community-wide outcomes, cornerstone projects developed to address each one of these targeted outcomes, and the development of logic models specifying target populations, project outcomes, and performance measures” (Brown and Fiester 2007: iv). Hewlett’s new president did not arrive with any preconceived notions about grantmaking, as he was new to philanthropy. Rather, he developed strategic grantmaking as a result of his initial experiences working in the foundation, specifically with regard to the environmental program. This program organized dialogues between environmentalists, ranchers, and farmers out West, but when the program officer was asked about what the dialogues were seeking to achieve, the reasons were process rather than results oriented. The president felt that this was unsatisfactory in terms of an evaluation. As a result, the foundation shifted to a more strategic approach throughout all of its programs, including the NII (Brest 2017). In terms of an exit strategy, it was a clear from the beginning that the foundation would only fund the project for six years from 2000 to 2006; however, the initiatives in East Palo Alto and West Oakland imploded before the end (Brest 2017).

Outcome and impact The Mayfair Improvement Initiative (MII) in 1997 was the first initiative Hewlett used to test comprehensive community improvement, a new concept at the time.

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Hewlett chose this site because of its struggle with poverty but also for its history of activism and leadership (Teegarden et al. 2011: 44). The two local partners – Silicon Community Foundation and the Mexican American Community Service Agency (MACS) – were responsible for the planning process after which the Mayfair Improvement Initiative began the implementation phase ( Brown and Fiester 2007). Hewlett’s $6.3 million contribution leveraged $9.6 million in additional funds for Mayfair. This made it possible for MII to yield tangible results in terms of recreational, cultural, and infrastructural improvements; additional social housing options; and economic opportunities ( Brown and Fiester 2007: C-1). Families were also supported in obtaining health insurance and better preparing their children for school. It also improved the level of local education and skills for adults by enrolling them in literacy, English as a Second Language (ESL), and General Education Development (GED) classes ( Teegarden et al. 2011). MII continued to operate with “substantial credibility and increasing capacity” two years after the initiative formally ended in 2006. Ten years after the initiative began, it became semi-autonomous from the Hewlett foundation and changed its name to Somos Mayfair (“We Are Mayfair”) ( Brown and Fiester 2007: 9). The West Oakland project took off in 1998 as Hewlett’s second initiative, and was called the Seventh Street McClymonds Corridor Neighborhood Improvement Initiative. This site proved more problematic than the first and faced challenges from the very beginning. Hewlett was not able to find a lead agency for the initiative and thus asked the San Francisco Foundation (TSFF) to serve in this role. After two and a half years, the Seventh Street McClymonds Corridor NII started to take shape, but “mistrust of outsiders and factionalism in the community undercut the f ledgling organization” ( Brown and Fiester 2007: ii). The lead agency made a total of 57 grants worth $1.6 million, but there is little data on their outcome and impact. The organization was dissolved in 2001, shortly after the executive director’s post was terminated ( Brown and Fiester 2007: ii). The final site in East Palo Alto was launched in 1999. The Peninsula Community Foundation (PCF) was the managing partner, and One East Palo Alto (OEPA) was the local intermediary for the planning process in Palo Alto. OEPA helped bring about positive change to jobs, education, and crime. However, this was only after PCF resigned as managing partner in 2002 because of disagreements on “how communities change, what the pace of change should be, and how best to develop civil capital” (Brown and Fiester 2007: ii). Hewlett took over the management, and although it was faced with challenges due to inexperienced staff, a high turnover in leadership, and disagreements with OEPA’s board, the initiative brought positive changes to the community. The NII helped create a special task force to reduce crime, produced mentoring programs for at-risk youth, English classes, and after-school programs.

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Ambiguity and benign fallibility Exploring a new concept – no clear benchmarks? When the initiative was launched, community change was still a young and developing concept. However, based on an assessment of what other foundations were doing, there was a belief that underserved communities would improve if more residents were actively involved in decision-making processes and community planning. Arguably, the Hewlett foundation played an important role in testing and pioneering new approaches. Although the formal assessment of the initiative was not complete until 10 years later, the experiences on the ground served as potential lessons learned for other foundations and future generations of community leaders. For instance, funders realized the importance of a theory of change and the value of articulating intended results from the outset. The initiative also served to highlight the need to build on realistically assessed, existing strengths within communities. Nevertheless, these lessons came at a high price, and the foundation did not realize many of its mistakes until it was too late.

Unclear strategy and theory of change The foundation did not have a detailed theory of change that linked the six NII goals, outlined a detailed strategy, and addressed the underlying assumptions (Brown and Fiester 2007: iii). Rather, NII’s approach to implementing its theory was untested and problematic. For instance, one of the key principles of the initiative was the importance of resident involvement, but there were no guidelines on how to operationalize this. The only requirement in place was that residents make up 51% of the planning group (Brown and Fiester 2007: iii). This led to differences between Hewlett and its partners on site on how best to leverage the support of the community and also made it more difficult for Hewlett to justify its approach.

Poor grantee relationships Community foundations were potentially helpful partners for a neighborhood initiative because they already had an established relationship with the community and a fund-raising capacity and could continue the work even after the project ended. Yet, this was challenging at times because of misaligned goals and expectations, an unclear division of roles, and challenging power dynamics (Brown and Fiester 2007: 25–26). The community foundations did not feel that Hewlett regarded them as “respected partners” and that they had adequate support to build their capacities (Brown and Fiester 2007: v). The neighborhood intermediaries that were created as new nonprofit organizations were also too inexperienced and lacked a strategic vision. The intermediaries were expected to demonstrate results after only six years, which in hindsight was too ambitious for a start-up organization (Brown and Fiester 2007: iv). The foundation did not realize just how much

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time was needed for community change. Hewlett allotted one year for planning, but by the end of that year, none of the sites were ready to begin. Hewlett was uncomfortable with long-term ambiguity and lacked the patience to allow for its partners to advance from an initial development phase (Robinson and Barengo 2004: 8) What strategies could Hewlett have used to build a stronger bond with its grantees based on mutual respect and recognition?

Measuring impact The evaluation approach that Hewlett developed together with a management consulting firm was common for community change initiatives (CCI) at the time – implementation evaluation. The evaluation firm felt the initiative was too complex to link any inputs to a specific outcome, so it suggested doing qualitative evaluations based on interviews with key stakeholders, site observations, document analyses, and so on that would feed into summaries on strengths and weaknesses and end with recommendations. As part of this process, the partner community foundations were also expected to collect data and create their own accounts of progress. This led to vague and descriptive reports that were unsatisfying to Hewlett, particularly after its strategic shift to outcome-oriented philanthropy. The foundation proceeded by hiring a second firm to collect data, but this led to complications in terms of integrating both evaluations and coming up with logical conclusions. In the end, it became clear that the lack of a welldefined strategy was too big an impediment to quantifiable measures and that the community foundations simply did not have the capacity to collect data to Hewlett’s satisfaction. What approaches are conducive to creating a fluid, collaborative, and creative environment for cooperation while allowing for progress evaluations?

Signal inertia, incentive deficiency, and a retreat to paternalism Not only did the program fail to keep up with changes in the community, but a change in Hewlett’s leadership in 2001 and the ensuing shift in NII’s approach created uncertainty for Hewlett’s partners and stirred up unrealistic expectations. New leadership also meant changes for the NII process, which created new tensions and problems. Community foundations were caught off guard by the sudden changes and felt that they would undermine citizen involvement and cause communities to lose momentum (Brown and Fiester 2007: v). The community foundations needed time to build the necessary capacity for self-evaluation and outcome tracking, and the partners had to implement these changes while the project was already underway.

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Conclusion This case is a good example of challenges related to several layers of organizations working toward the same goals. There is a trade-off between expanding the number of partners in a project and efficiency in terms of streamlining and communication. The Hewlett foundation sought to overcome information asymmetries in relation to the local communities by cooperating with community foundations. Being much closer to the issues than Hewlett, however, these partner foundations had their own ideas on what needed to be done. There was also a trade-off between ambition in terms or scope and throughput in terms of available resources. Hewlett did not just want to focus on one community in a single city; instead, it chose three communities in Southern California that demonstrated exemplary need. In the end, Hewlett was unable to effectively manage the complexity of the initiative and was left with limited results, especially when considering the size of their investment.

Study questions 1) 2)

3)

4)

How could the foundation have better prepared the three sites for community change? What are some of the most important factors to consider after there has been a change in leadership? How can these changes be communicated with grantees? What are the major signals that Hewlett failed to notice? What system could it have put in place to ensure that all actors were on the same page? What are the uses and limitations of evaluations as tools in foundations’ decision-making?

References case 8 Brest, P. (2017, December 15). Stanford University, Palo Alto, CA. Brown, P., & Fiester, L. (2007). Hard Lessons about Philanthropy & Community Change from the Neighborhood Improvement Initiative. Menlo Park, CA: William and Flora Hewlett Foundation. Robinson, A., & Barengo, S. (2004). Lessons from the Middle: Managing a Neighborhood Improvement Initiative. San Jose, CA: Community Foundation Silicon Valley (CFSV). Retrieved from www.siliconvalleycf.org/docs/LessonsfromtheMiddle.pdf Teegarden, P. H., Hinden, D. R., & Sturm, P. (2011). The Nonprofit Organizational Culture Guide: Revealing the Hidden Truths That Impact Performance. San Francisco, CA: Jossey-Bass.

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Case 9: Eberhard von Kuenheim Foundation, Germany: a new start for Theresienthal Overview of the case The Eberhard von Kuenheim Foundation (the foundation) entered a low- to moderately complex task environment, even though the number and diversity of stakeholders involved turned out be high, bringing with it considerable coordination efforts. Yet, critical to the project, all partners did share one common goal: the revival of one particular corporation in one specific place, the glass manufactory Theresienthal.10 From the start, the project had therefore a limited scope as well as a relatively clearly defined endpoint. Despite major challenges, among them the difficult search for a new owner, the task environment the foundation and its many partners had to deal with was relatively stable. The project was not politically contentious and benefitted from the support of political actors on the local and state level. In addition, the costs and benefits for each stakeholder were comparatively low, not least because of the way in which the foundation managed to share costs and risks. The foundation focused in particular on coalition building, using a snowball system to pinpoint new partners who could solve emerging problems – in most cases pro bono.

The foundation The BMW Group is one of the world’s leading premier manufacturers of automobiles and motorcycles. In 2016, the company had more than 124,000 employees worldwide and revenues of over €94 billion. In 2000, the BMW Group launched the Eberhard von Kuenheim Foundation in honor of the long-time chairman of its management (1979–1993) and supervisory boards (1993–1999).11 The foundation and its mission are closely tied to its namesake’s convictions. A proponent of entrepreneurship and corporate responsibility, Dr. Kuenheim believed that entrepreneurs must contribute to solving social problems (Glaser and Wessely 2006). On the one hand, the foundation has, therefore, the mission to promote entrepreneurial thinking and actions as well as to strengthen free enterprise, especially in economically disadvantaged regions. On the other hand, it aims to highlight and enable the social responsibility of citizens, in particular economic TABLE 3.9.1 The Theresienthal case in context

High Complexity Low Salience Issue or Problem

Low Complexity

High Dynamism

High uncertainty

Medium uncertainty

Low Dynamism Consensus as dominant style

Theresienthal A case of medium uncertainty and a steady-state scenario

Low uncertainty

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leaders. From the start, the foundation did not fund unsolicited proposals but worked on its own projects (Eberhard von Kuenheim Stiftung 2018). Considering the timing of the Theresienthal project shortly after the foundation’s establishment, the rescue mission also served as a model project to prove the foundation’s theory of change.

Governance and management Dr. Christoph Glaser became the first director of the foundation after he had worked for years at the BMW group as personal assistant to Dr. Eberhard von Kuenheim. Their shared history was the basis for a trustful and close working relationship in this new context. Glaser knew which values Kuenheim – who served until 2010 as the chair of the board of trustees and later continued his involvement in the foundation as an honorary board member – hoped to promote. Equally important, Kuenheim trusted Glaser and advocated on his behalf at the BMW Group. When other board members initially criticized what they saw as the high-risk and uncertain outcome of the Theresienthal project, Kuenheim used his influence to protect Glaser and to defend the project (von Schnurbein 2017). With Kuenheim’s backing, Glaser was able to secure a high degree of autonomy and freedom for the foundation. Together with deputy director Dr. Mirjam Storim, he managed the project “A New Start for Theresienthal” without adding any extra levels of hierarchy. While Glaser and Storim lacked expert knowledge of glass manufacturing and arguably even philanthropic experience, both were all-rounders with broad, interdisciplinary backgrounds ( Glaser and Wessely 2006: 65). Their motivation and capability to secure the support of a wide range of specialists was the deciding factor in the project’s success ( Glaser and Wessely 2006: 158).

Role of the foundation In this case, the foundation’s role is mainly innovative. As an economic-liberal organization, the Eberhard von Kuenheim Foundation invested in this pilot experiment to demonstrate the entrepreneurial possibilities in a region that many had already written off as a loser of globalization. Glaser and Storim envisioned their foundation as a capacity builder. By embracing trust and network building as essential elements of entrepreneurship, the foundation tried to implement its values despite or even because of the project’s uncertainty. With their groundwork, they hoped to create an environment for entrepreneurial commitment and to prepare Theresienthal for a successful re-entry into the market ( Glaser and Wessely 2006: 109). From the start, the foundation served as indisputable project lead and was responsible for strategic decisions. Furthermore, the foundation functioned as the center of the support network – continuously bringing together partners, acting as a moderator and mediator, gathering and distributing information ( Glaser and

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Wessely 2006: 108). Beyond the new start of Theresienthal, Glaser, and Storim did not plan for the foundation to play a long-term leading role.

Description of the specific program The decline of Theresienthal Theresienthal was founded in 1836 and quickly became one of the most prestigious glass manufacturers in the world. By the 1950s, over 300 employees produced exquisite glass for domestic and international markets. The decline of the company began in the 1960s when its handmade, labour-intensive glassware was failing to compete with much cheaper mass-produced goods. In the 1980s and 1990s, the company declined even further: it continuously reduced its workforce and was resold twice. After two insolvencies in 2000 and 2001, Theresienthal finally closed its doors (von Schnurbein 2011: 3). The closure of Theresienthal, one of the best-known producers of crystal glass in Germany, is only one example of the decline of the traditional Bavarian glass industry. Since the mid-1980s, the industry had lost over 1,700 jobs, i.e. two out of three. An additional 57 jobs were lost in Theresienthal ( Glaser and Wessely 2006: 42). The venerable skills associated with the highly specialized craft of crystal glass production threatened to be lost. Within a generation, insiders feared, the knowledge and skills required would ultimately give way to cheaper, massproduced glassware made with modern technology.

A new start of Theresienthal The idea for the project was born when Dr. Peter Lex, a lawyer who specialized in foundation law, approached the foundation and introduced Theresienthal’s former operating manager Max Hannes in May 2003 ( Glaser and Wessely 2006: 61). Hannes had worked at Theresienthal for almost 40 years and, together with former colleagues, continued to care for the manufactory and its grounds when it closed after its second insolvency in 2001 (von Schnurbein 2011). They made sure that everything was in order, repaired broken windows and equipment, and continued to sell unsold stock to pay for maintenance costs. Hannes’s dedication to the company and his passion for the traditions of glass manufacturing inspired Glaser, who saw a promising opportunity for the new foundation in line with its mission. First, the foundation approached the Boston Consulting Group, which analyzed the premium glass market and assessed the costs of a possible restart. Taking into account the persistent stagnation of the market and the economic decline of the region, the consultancy recommended a private-public partnership to distribute risk ( Glaser and Wessely 2006: 84). In 2003, the foundation therefore set about creating a strong network that in the end included over 60 different partners to revive the company.

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While the foundation successfully grew and managed this network, it proved much harder to find new leadership for the company, i.e., a committed owner who would invest in Theresienthal’s future. As a transitional solution, the foundation decided to recruit a CEO who could guide the manufactory during its restart. Ulvi Aydin, an experienced interim manager, joined the project in June 2004. Yet, having acquired most of his expertise in the mass market, he did not share the “premium” vision that the design team Kuball and Kempe created for the highend crystal manufactory. Because of these differences, Aydin decided to leave the company less than a year later ( Glaser and Wessely 2006: 136). Still urgently searching for a long-term solution, the foundation worked together with a recruiting company that also offered their services pro bono. In the meantime, the close relationship to the BMW Group proved to be invaluable once more: Hartmut Kämpfer, former head of BMW’s human resources, returned from semiretirement to serve as interim CEO (Glaser and Wessely 2006: 152). While struggling to find a new owner, the foundation also had to determine the legal framework and organizational structure of the new Theresienthal manufactory. In the absence of a prospective owner, the foundation decided to create the foundation “Stiftung Theresienthal,” which could function as owner of the newly established company, Kristallglasmanufaktur Theresienthal GmbH. The mission of Stiftung Theresienthal was “to preserve and to foster the glassmaking tradition by the means of resurrecting the manufacturer Theresienthal” (Glaser and Wessely 2006: 121–122). Thus, Stiftung Theresienthal could serve a nonprofit purpose, while also owning a commercial enterprise – a unique model in Germany. This plan required careful implementation, in particular concerning the purchase of Theresienthal. For instance, Glaser and Storim had to negotiate a purchasing agreement with the liquidator on behalf of the “Stiftung Theresienthal,” which did not exist at this point.12 It was only once both parties signed the purchase contract on July 22, 2004, that they were able to register the “Stiftung Theresienthal.” This led to the creation of the Kristallglasmanufaktur Theresenthal GmbH, which in turn was able to issue the working contracts for the employees. The foundation took all of these steps in less than 10 days. On August 1, 2004, 18 former employees returned to Theresienthal and restarted production (Glaser and Wessely 2006: 131).

A new owner and the foundation’s exit strategy Originally, the foundation had planned to complete the project in two years (von Schnurbein 2017). However, the failed search for a new owner and the sudden change in leadership of the new manufactory delayed the foundation’s exit strategy by a year. Finally, in the fall of 2005, the recruiting company found a promising potential owner: Max Freiherr von Schnurbein, an investment banker with close ties to Theresienthal; he was born in Zwiesel only 10 kilometers away from the manufactory ( Glaser and Wessely 2006: 153–154). Nevertheless, the negotiations – in particular regarding the power balance between the new owner and “Stiftung Theresienthal” – were drawn out and difficult.

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In March 2006, the foundation and von Schnurbein reached a compromise. Von Schnurbein purchased the majority of shares, while the “Stiftung Theresienthal” was granted a say in certain strategic decisions, for example in a potential hiring process of a new CEO ( Glaser and Wessely 2006: 155). The Stiftung Theresienthal was a minority shareholder until the end of 2010; now, it primarily focuses on the preservation of the traditional glass production in the region.

Origins and rationale As a new addition to the philanthropic landscape, the foundation was under immense pressure to define its role and to prove its value. Glaser later explained that he wanted to meet the high expectations of the board and saw the Theresienthal project as a promising opportunity to position the foundation. He believed the project could demonstrate what the foundation “was all about” ( Glaser and Wessely 2006: 63). As previously highlighted, the mission of the foundation was to encourage entrepreneurship in the most unlikely places. Theresienthal seemed like an ideal pilot project in that regard: its former employees were passionate, highly qualified, and resourceful, but the region where the factory was based, the Bavarian Woods, was in economic decline. A successful revival of the glass manufacturer could forcefully demonstrate the foundation’s theory of change. First, however, the foundation had to grapple with some important questions. Could – and indeed should – a foundation step in and try to preserve such precious heritage by bringing the glass manufacturer Theresienthal back to solvency and making its business operations sustainable? Or should market forces and technological progress run their course? This is where the Eberhard von Kuenheim Foundation decided to approach both goals simultaneously: preservation and profitability. From the start, the design of the project was based on the assumption that the factory had to be revived as a profitable company and not as a museum to solely preserve a regional tradition. What is more, it should not have to rely on subsidies from the foundation or public funding in the medium to long term. The foundation believed that this was the only way to prove the impact of a successful public-private partnership ( Glaser and Wessely 2006: 123). When the foundation had to decide on an organizational model for the new Theresienthal, the question as to what economic role a foundation could or rather should play became central again. Should they re-establish the manufactory as a foundation or should the foundation be an extra entity that serves as the owner of a new operation? If the main task of Theresienthal was to preserve the tradition of crystal glass production, a foundation could indeed be a valid option. However, if the main goal was to establish an autonomous company with an economic motive, the foundation believed it should re-establish Theresienthal as a taxable corporate entity. The project managers Glaser and Storim argued against opting for a foundation model, despite multiple project partners favoring that option. They believed that a foundation would soften economic blows, which in turn would decrease profitability and workplace morale as well as diminish innovative power.

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In the end, the fact that the European Social Funds would only financially support a commercial enterprise, not a foundation, strengthened their position and served as the decisive factor ( Glaser and Wessely 2006: 122–123).

Design and implementation The network The foundation did not have the means to underwrite the relaunched company. Instead, the foundation’s main role was to spearhead the program and to establish a strong network to support the venture. Experts from other businesses, foundations, and nonprofit organizations as well as representatives of state agencies joined the foundation and former employees in their fight for Theresienthal (von Schnurbein 2010: 416). In the end, more than 60 project partners were involved, forming a powerful public-private partnership (see Table 3.9.2). All partners volunteered to support Theresienthal and did not receive stocks in the future company (von Schnurbein 2010: 417). They later explained that their motivation was influenced by a firm belief in the meaningfulness of the project as well as by the positive working relationships the foundation was able to build. One could also argue that the affiliation with a “big name” like BMW and the possible prestige gained from such a cooperation might have been a factor ( Glaser and Wessely 2006: 79). In the beginning, the foundation contacted people who might be able to support the project by offering, for example, consulting and legal services. However, because of the inherent appeal of the story as well as the skillful storytelling by the foundation (more on this factor later), the project soon became visible enough for people to contact them about possible opportunities to cooperate. In total, Glaser and Storim spoke with more than 300 people individually, retelling the story of the former employees’ commitment and their vision for a new Theresienthal ( Glaser and Wessely 2006: 78). Table 3.9.2 demonstrates the diversity of the project partners, including lawyers and consultants, designers and advertisers, city and state officials, university professors and philanthropists, to name a few. In the following, we point out one example of this private-public partnership at work. The financing of Theresienthal’s revival exemplifies a successful public-private partnership, as well as the foundation’s impressive networking capabilities. On the one hand, two heavyweights of the German foundation landscape (Gemeinnützige Hertie Stiftung and Deutsche Bank Stiftung) and a private investor (Eugen Viehhof) bore the majority of the non-personnel costs (Glaser and Wessely 2006: 91). On the other hand, multiple parties split the personnel costs for the first 12 months: the Federal Employment Agency (Bundesagentur für Arbeit) paid 45 percent, the European Social Fund contributed an additional 45 percent, and the new company itself paid 10 percent, which the employees in turn reinvested in their company as a fixed-rate loan ( Glaser and Wessely 2006: 88). In addition, the foundation was able to reduce the manufactory’s high energy costs by cooperating

TABLE 3.9.2 Network Theresienthal13

Private Partners

Public Partners

Nonprofit Partners

Kristallglasmanufaktur Theresienthal GmbH BMW Group

City Level • Arbeitsagenturen Deggendorf und Zwiesel • Erster Bürgermeister Robert Zettner • Stadtpfarrei Zwiesel

• Eberhard von Kuenheim Stiftung, Stiftung der BMW AG • Bayrische Volksstiftung / Bayrische Einigung e.V. • Karl Graf Spreti Sonderfonds • Deutsche Bank Stiftung • Bayrische Forschungsstiftung • Gemeinnützige Hertie-Stiftung • Rat für Formgebung • Vbw Vereinigung der Bayrischen Wirtschaft e.V.

Legal Services • Kanzlei Dr. Mohren and Partner • Wellensiek Rechtsanwälte • Rechtsmanagement Wirtschaft and Umwelt • Arnecke Siebold Rechtsanwälte Finances and Financial Consulting • vibrogruppe – Eugen Viehof • Consilia Wirtschaftsprüfung • RA Georg Dietrich Prinz von SchoenaichCarolath, Insolvenzverwaltung • RA Hanns Pöllmann, Insolvenzverwaltung • Deutsche Bank Private and Business Clients • BMW Financial Services • Auctus Management GmbH • BonVenture Management GmbH • Sparkasse Regen-Viechtach • EVF Vermögensanlagen und Beteiligungen GmbH & Co. KG Consulting • Capeo Consulting AG • AdVantage Managementberatung • The Boston Consulting Group GmbH Design • Kuball and Kempe • Katharina Glaser-Lichtner • Ostermann and Partner • A&I • Spiritec • Gangkofner Verwaltung KG

Regional Level • Regierung von Niederbayern, Abteilung Wirtschaft, Infrastruktur und Verkehr • Landratsamt Regen State Level • Bayrisches Staatsministerium für Arbeit und Sozialordnung, Familie und Frauen • Bayrisches Staatsministerium für Wirtschaft, Infrastruktur, Verkehr und Technologie European Level • European Social Fund Academia • Friedrich-AlexanderUniversität Erlangen Nürnberg • Glasfachschule Zwiesel • UnternehmerTUM GmbH, Technische Universität München

Marketing, Communications, and Advertising • Jung V. Matt AG • Neumann and Kamp Historische Projekte • Staatliche Porzellan Manufaktur Meissen GmbH • LuitpoldLounge • KOM: Media Consulting Energy • UMR Gesellschaft für Umweltmanagement und Risiko-Service mbH • E.ON Bayern AG • Ferngas Nordbayern GmbH Source: Own representation based on closing credit of Wessely (2006) and epilogue of Glaser and Wessely (2006).

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with its electricity and gas providers, E.ON and Ferngas Nordbayern, respectively ( Glaser and Wessely 2006: 111).

Performance measures Foundation experts now widely discuss the merits of performance measurement and the concept of “strategic philanthropy.” This was less the case in the early 2000s when the foundation embarked on this project. On the contrary, Glaser and Storim only started with an idea: to restart the company. Was it even possible to revive a traditional manufactory, hit hard by pressures of globalization? Their approach was in fact the opposite of strategic philanthropy. Instead of laying out a solid plan of action and defining concrete milestones, the project is an example of muddling-through, as well as learning-by-doing. In many instances, the next step only became clear once a new partner joined the project or an unforeseen problem called for an innovative solution (Glaser and Wessely 2006: 167). The foundation reacted in a fast and flexible manner, but it would be wrong to attribute the positive outcome of the project to any long-term planning. This fact makes this a project that would be extremely difficult to replicate.

Outcome and impact The project’s main achievement was the revival of Theresienthal. After being forced to shut down, the foundation helped to put the factory back into business with the same 20 some employees that it previously employed (Peitsmeier 2010). In addition to the immediate benefits to the employees and the region, the project demonstrated the potential of the foundation’s strategy to foster entrepreneurship in a very unlikely place under difficult circumstances. Equally important, Theresienthal was seen as an example of the power of values over conventional market forces. It was not the maximization of profits but the focus on tradition and quality that led to success (von Schnurbein 2011). The dual objectives seem to have been met. In February 2005, about half a year after Hannes and his colleagues handcrafted the first glass, Theresienthal presented its new collection and premiered its advertising concept at a large trade show in Frankfurt am Main. The first trade show proved to be an immediate success: Theresienthal received praise for its beautiful stand and secured orders totaling high six-figure sums ( Glaser and Wessely 2006: 146–148). After von Schnurbein acquired Theresienthal, the revenues increased by 20 percent in 2006 and in 2007 (Wimmer 2009). However, the global financial and economic crisis did not spare the newly reestablished glass manufactory. Demand for crystal glass products dropped in the aftermath of the crisis, and 2009 was the most difficult year for Theresienthal. For example, a luxury hotel in Dubai canceled a large order – a major profit setback for the manufactory (von Schnurbein 2017). The new owner addressed the resulting uncertainties with traditional economic measures, such as reducing employees’

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working hours, but the crisis did not revive the former support network (Peitsmeier 2010). However, Theresienthal ultimately recovered and is still successful today. It makes almost one-third of its profit outside of Europe, with Russia as its biggest market (Hildebrand 2008).

Importance of storytelling From the start, the foundation used the compelling story of the stoic and loyal glassmakers to “sell” the project. Glaser and Storim did not convince the board to support their initiative by presenting facts and figures. Instead, they brought the finest crystal glasses to the boardroom to set the stage for the “Story of Theresienthal.” As mentioned before, many partners were attracted by the story’s appeal. They committed their time and resources to the project because of the foundation’s ability to emphasize its significance. Newspaper articles covering Theresienthal’s revival highlighted this story as well. Yet, the foundation not only counted on storytelling during the project; they also hoped to reach a wider audience to spread their theory of change. The filmmaker Dominik Wessely accompanied the project through its various stages over two years. He produced a documentary called Die Unzerbrechlichen (The Unbreakables) (Wessely 2006) and published a book together with Christoph Glaser about the development, implementation, and outcomes of the project: Unternehmen statt unterlassen: Von der ungewöhnlichen Rettung eines Traditionsbetriebs (Acting instead of retraining: about the exceptional rescue of a traditional company) (Glaser and Wessely 2006). Through the book and movie, more people learned about this unusual initiative and its underlying values. It inspired others to contact the foundation and project partners and to embark on similar activities (von Schnurbein 2011). Especially in the region, the movie was seen as an example of the commitment to the small community and strengthened the belief in its potential.

Social capital and further cooperation The project’s success depended on a well-functioning network, which in turn depended on trust in the foundation. The first project partners to come on board had already worked with the foundation and shared its norms and values. They, in turn, talked to some of their close business or project partners who then gave their support to Theresienthal. In this way, the network grew stronger and wider. Meanwhile, the foundation made sure that the project was open to all interested parties and the relationships between the different partners were conflict-free. The foundation further fostered cooperation via informal updates and social events (von Schnurbein 2010: 417). While the network as such dissolved after the successful revival of the manufactory, the foundation continued to work with some of the partners. One example of the longevity and fruitfulness of these collaborations is the initiative JOBLINGE. In 2008, the Boston Consulting Group and the Eberhard von

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Kuenheim Foundation created the organization “to make a visible and sustainable contribution to the fight against youth unemployment.” Similar to the Theresienthal project, JOBLINGE brings together private, public, and voluntary sectors (2018a). Over the last 10 years, the initiative grew substantially and now spans 25 locations. In total, JOBLINGE prepared over 6,000 disadvantaged young people for the job market (2018b). The pilot projects were implemented in Munich and in the Bavarian Forest. There, one of the main partners was the employment agency Zwiesel, a key actor in the revival of Theresienthal (JOBLINGE e.V. 2018c).

Ambiguity and benign fallibility At first glance, the project seems like an outright success. The glass manufactory Theresienthal reopened, the employees were able to return to work, and a new owner made the company profitable again. At the same time, the new foundation established a strong profile and demonstrated the positive impact of a wellfunctioning public-private partnership. In light of these successes, is it even possible to speak of an ambiguous project? Can we find any traces of benign fallibility? By exploring the project in greater depth, we conclude that there are indeed multiple factors that place this project in the gray area between success and failure. These are summarized in the following:

Cost-benefit analysis? Unfortunately, there is no data available on the overall costs of the project or even on the foundation’s endowment. At the start of the project, the Boston Consulting Group projected that it would cost up to €10 million to restart Theresienthal (von Schnurbein 2011: 5). Researcher Georg von Schnurbein, an expert on the case, estimates that it was less in the end, especially because the foundation saved money on innovative but cheaper marketing and distribution strategies (von Schnurbein 2017). However, it still cost millions to save around 20 jobs in a struggling, and some might argue, obsolete manufacturing branch. Dozens of partners dedicated their time and resources to a manufactory that produces high-end, luxury products, while similar glass manufacturers had to close without receiving any outside support. Yet, is it truly possible to put a price tag on a century-old tradition that would have likely been lost otherwise? The project contributed to the preservation of crystal glass manufacturing, an essential piece of Bavarian heritage, without turning the Theresienthal into a museum but instead a profitable, economically sound company. At the same time, another priceless principle was at the core of the project – the notion of human dignity. Many of the employees had worked for decades at Theresienthal, having learned their trade as teenagers. After Theresienthal had closed, most had to rely on unemployment benefits or worked seasonal jobs in the construction sector. The chance to return to Theresienthal and their professions was as unexpected as it was cherished. For example, Max Hannes, the

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operating manager introduced at the beginning of this case study, was able to retire after 51 years at the company in 2013 (Wolf 2016). To what extent do these factors justify the high investment in this project?

Theory of change – problem of replicability? As mentioned before, the foundation had the goal to prove its theory of change that entrepreneurship and innovation was possible in the most unlikely places if people embraced network building as an essential element. For Theresienthal, this theory indeed proved to be true. The region suffered from extreme economic hardship, and the project, as well as the associated attention by high-profile companies like Deutsche Bank and BMW, sparked new confidence and optimism. Used to negative press on the economic decline of their region, people embraced the positive media coverage. The documentary, which ran in cinemas, especially helped to spread this positive effect beyond Theresienthal itself (von Schnurbein 2017). However, although the foundation had envisioned the project as a model for possibilities, it struggled to replicate its success. After Glaser and Storim finalized the project, they turned their attention toward the east of Germany. Both the documentary Die Unzerbrechlichen and the book Unternehmen statt unterlassen mention that the next project was supposed to be the revival of a whole town. The foundation planned to use the same concept, i.e., a public-private partnership, to invigorate the community’s identity and, at the same time, its competitive edge ( Glaser and Wessely 2006: 170). However, there is no information available as to whether the foundation ever took this project to the next step. We therefore have to assume that the foundation was not able to implement the strategy again. Can we consider a model project successful if the concept cannot be replicated? Can the success of the JOBLINGE initiative be traced back to the Theresienthal project?

High credibility due to independency or close ties? One of the success factors mentioned earlier is the foundation’s ability to establish and coordinate a wide network of project partners. Experts argue that the foundation was able to gain the trust and support of these partners because of its high credibility as an independent, altruistic organization. Because of its legal status and organizational structure, the foundation could take high risks without worrying about the threat of losing the confidence of clients or investors, and, crucially, it could think long term. In addition, the foundation was neither self-interested nor aiming to make a profit or grow its own business. For these reasons, the foundation was considered by others to be a reliable partner. The other project partners trusted the foundation to act in the common interest without exploiting any one partner or pursuing its own advantage (von Schnurbein 2011).

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However, we could also argue that the “big names” behind the foundation were in fact responsible for the success of the project. As one of the largest employers in the region, BMW was held in high esteem and project partners might have hoped to build a long-term relationship with this important player (von Schnurbein 2011). Furthermore, Glaser profited from Kuenheim’s trust and mentorship. Because of Kuenheim’s vocal support, he was able to make and enforce decisions with limited fear of negative consequences. Were these close ties decisive for the project’s success, or did the foundation gain this wide support because of its independent organizational structure?

Conclusion Our goal is not to diminish the significance that the revival of Theresienthal had for its employees and the region. On the contrary, the case serves as an impressive example of the impact of people working together toward a common goal. But it is also important to ask the following questions. How much money should a foundation spend on a specific project? Is it worth the dedicated time and resources? Who or what is actually responsible for its success, and what part did the foundation play in that? And if a project lacks a clear strategy and specific milestones, how can “lessons learned” be applied in the future?

Study questions 1)

2) 3)

4)

Why might this project not be replicable in other locations? Under what circumstances should foundations take replicability and scalability into consideration in embarking on a specific project? Was the size of this investment worth the huge amount of effort and cost? What kind of value did the project create? As one of the funders, what factors would you have taken into consideration when deciding to support Theresienthal? How would you have weighed cultural heritage and economic benefits? Who ultimately benefits most from the revival of the traditional glass factory?

References case 9 Eberhard von Kuenheim Stiftung. (2018). Home. Retrieved 15 February 2018, from www. kuenheim-stiftung.de/ Glaser, C., & Wessely, D. (2006). Unternehmen statt unterlassen: Von der ungewöhnlichen Rettung eines Traditionsbetriebs (181 S.). Berlin: Econ. Hildebrand, J. (2008, March 2). Das Wunder von Theresienthal. DIE WELT. Retrieved from www.welt.de/wams_print/article1746445/Das-Wunder-von-Theresienthal.html

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JOBLINGE e.V. (2018a). English Overview. Retrieved 15 February 2018, from www. joblinge.de/english-overview/ JOBLINGE e.V. (2018b). Daten und Fakten. Retrieved 15 February 2018, from www. joblinge.de/initiative/daten-und-fakten/ JOBLINGE e.V. (2018c). Geschichte. Retrieved 15 February 2018, from www.joblinge.de/ initiative/geschichte/ Peitsmeier, H. (2010, July 16). Glasmanufaktur Theresienthal: Die Unzerbrechlichen werden modern. FAZ.NET. Retrieved from www.faz.net/1.1011686 von Schnurbein, G. (2010). Foundations as Honest Brokers between Market, State and Nonprofits through Building Social Capital. European Management Journal, 28 (6), 413– 420. https://doi.org/10.1016/j.emj.2010.06.008 von Schnurbein, G. (2011). Filling the Glass: Creating Impact through Social Capital (CSI Research Project Strategies for Impact in Philanthropy No. CSI TC 011). Heidelberg: Centre for Social Investment of Heidelberg University. von Schnurbein, G. (2017, December 15). [Phone Interview]. Wessely, D. (2006). Die Unzerbrechlichen (Documentary). Germany: Gambit-Film, BR, Arte. Wimmer, S. (2009, April 19). Vom Hölzchen aufs Gläschen: Kristallklare Strategie. Handelsblatt. Retrieved from www.handelsblatt.com/unternehmen/mittelstand/vom-hoelzchenaufs-glaeschen-kristallklare-strategie/3159604.html Wolf, H. (2016, July 31). Max Hannes. Bayerische Charakterköpfe. Bayerischer RundfunkBayern 2. Retrieved from www.br.de/radio/bayern2/sendungen/land-und-leute/maxhannes-leidenschaft-fuer-glas-wolf100.html

Notes 1 These districts are as follows: Arkansas: Any District; California: Los Angeles Unified School District, Oakland Unified School District; Colorado: Denver Public Schools; Georgia: Atlanta Public Schools; Indiana: Indianapolis Public Schools; Louisiana: Orleans Parish; Massachusetts: Boston Public Schools; New Jersey: Camden City School District; New York: New York City; Oklahoma: Any District; Tennessee: Memphis City Proper; Texas: Houston Independent School District; San Antonio Independent School District; Washington, DC: District of Columbia Public Schools. 2 These are California, Colorado, Georgia, Indiana, Louisiana, Massachusetts, New Jersey, New York, Tennessee, and Texas. 3 For Principles for Quality Charter School Authorizing, see NACSA (2018). 4 For a comparison of laws between states, see Wixom (2018). 5 Andrew Maul, an assistant professor in the Graduate School of Education at the University of California-Santa Barbara, focuses his research on measurement theory, validity, and research design. 6 At the time of the survey, the order of concern for global threats in the US is ISIS, Iran’s nuclear program, cyber-attacks, tensions with Russia, global climate change, and territorial disputes with China. 7 The Clean Power Plan set achievable standards to reduce carbon dioxide emissions by 32 percent from 2005 levels by 2030 (White House 2016). 8 For example, Philipp Morris and British American tobacco sued the British government because of a law that requires cigarettes to be sold in plain and simple packaging (effective as of May 2015). In another case, Philipp Morris sued Uruguay for increasing the size of its health warnings on cigarette packages. 9 The most recent funder additions are the Gannett Foundation, Lush Charity Pot, Joffe Charitable Trust, and Alexander Mosley Charitable Trust. 10 Theresienthal is a relatively remote community and part of the small city of Zwiesel in the Bavarian Forest, which has only around 9,500 inhabitants (www.zwiesel.de).

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11 On the company’s centennial anniversary, the staff and operations of BMW’s two corporate foundations, the BMW Stiftung Herbert Quandt and the Eberhard von Kuenheim Stiftung, were consolidated in 2016. Both foundations are now operating under the name “BMW Foundation Herbert Quandt,” but the Kuenheim Foundation continues to support its ongoing projects. The capital base of the joint foundation was significantly increased, exceeding €133 million in 2016. Dr. Kuenheim continues to serve as an honorary member of the joint board of trustees (bmw-foundation.org). 12 A devastating expertise on environmental matters additionally complicated this matter. It classified Theresienthal as a contaminated area; soil remediation was expected to cost more than €200,000. In March 2005, the issue was dropped, and the purchasing contract that contained an escape clause in case of a contamination finally became valid in May 2005 (Glaser and Wessely 2006: 128, 144). 13 Individual support from Dr. Fernando Cantu, Dr. Heinrich Simon, Gerhard Brose, Fritz Roeckl, Stefan Sippell, Ingeborg Seyfert, Angelica Bergengruen, Verena Freifrau Ebner von Eschenbach.

4 IMPLICATIONS Living with benign fallibility

In this book, we have tried to advance an organizational argument: philanthropic foundations, neither beholden to market expectations nor to the ballot box, are among the freest institutions of modern, democratic society. They enjoy a dual independence that when combined with their particular governance structure is the source of both the relative strengths and weaknesses of foundations. Foundations suffer from chronic signal and incentive deficiencies, which we term the “benign fallibility syndrome.” This syndrome is one of the keys to understanding the performance enigma of philanthropy, i.e., why many foundation projects achieve ambiguous results even though they may have been carefully planned and executed and assessed against agreed-upon performance standards.

Lessons learned In this chapter, and with the benefits of insights from the case studies, we will revisit the benign fallibility syndrome and venture into sets of recommendations for the governance and management of foundations as well as addressing the role of grantees. To begin, and drawing on the case studies, it is useful to ask: what are the lessons learned? Our cases are different in many respects – but they also share some common characteristics. One is the ambiguity of their “success” or “failure.” At some moments, or from some perspectives, all might be considered a success and at other moments or from other perspectives less so. For example, JRCT’s work on freedom of information was “unsuccessful” for many years and then achieved some important results, which some might argue are now being eroded. The same might also be said of KBF’s work on Muslim integration into Belgian society and Pew’s work on climate change. The cases also share a common problem of attribution – what difference did the foundation, as distinct from a range of other actors and factors, really make?

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Aside from the ambiguity of the foundation’s “success” or “failure,” there are also some recurring operational themes to do with foundations’ roles and assets, the complexity and dynamism with which they contend, the roles they sought for themselves or slipped into, and issues to do with cooperation, timing, planning, f lexibility, and politics. Ultimately the case studies shed light on the performance enigma of foundations and the associated benign fallibility syndrome. The Theresienthal case, for example, illustrates the way in which foundations may use their financial independence and neutrality to foster networks and collaboration and to take risks of which other institutions might be wary. The Kuenheim Foundation became the risk absorber and bridge-builder. The cultural heritage of the region played an important role in motivating funders to invest in a traditional industry that had been squeezed out of the economy by the forces of globalization. In rescuing the glass factory, however, the foundation did not have a strategy upfront and defied market logic for a project with very limited replicability. The rescue mission of Theresienthal would not have been possible without the support of corporate giants with ties to the region. Similarly, the Cariplo case on social housing shows the way in which a foundation may use its name and reputation to exert influence and access influential networks, again becoming a bridge-builder but also forging an institution. Cariplo highlights the power of working cooperatively with public and private bodies and the way in which a foundation’s ability to make long-term plans and investments can assist ambitious projects in reaching their goals. It also highlights some of the important trade-offs foundations must make in projects that are both socially oriented and entrepreneurial; Cariplo needed to help people who were being squeezed out of the local housing market but also make social housing attractive to investors. Furthermore, this case speaks to the difficulty of replicating projects that were made possible by a long history of local networks. The Mozaik case illustrates some important issues to do with uncertainty and dynamism in the face of complex goals: even the best of projects can falter because of uncontrollable circumstances, including severe weather and the difficulty of doing business in particular contexts and markets. Like other cases, Mozaik highlights the value of flexibility when working in unpredictable circumstances. After the devastating floods, Mozaik switched gears by helping local farmers rebuild their livelihoods. Similar to the Cariplo case, the main difficulty pertains to managing a dual-goal structure that seeks to be both social and economic. Although Mozaik’s social business helped bring together people from conflicted ethnic communities, it has not yet managed to become self-sustaining. The Walton case is interesting for various reasons including the way in which it highlights the fact that public good is a contested concept, as are routes to producing it. In highly contested environments, foundation projects can easily be seen as particularistic at best and as overtly political as well. Philanthropic dollars may have a decisive influence on public policy areas and may thus be seen as distorting or undermining public policy. This case, like others, also illustrates the

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fact that solving policy problems is complex and usually requires more than one kind of intervention. This complexity, coupled with Walton’s strong family legacy in propagating free-market principles, has led to an agenda that has put school autonomy and school choice at the center of school reform. While the foundation has partially responded to signals from communities indicating that structural issues of poverty also need to be addressed, it satisfices with regard to its target cities, performance measures, and the research that informs its theory of change. The Hewlett case again underlines issues to do with time and timing. Enough time needs to be allocated to understand the organizational cultures of partners and to ensure relevant stakeholders agree on goals, strategies, and time lines; partners need to be treated as fellow change agents and involved early on. The time frame for deliverables needs to take into account building a project from scratch, as well as allowing for a change in strategy if the current approach is not working. Perhaps the most important lesson from this case is that the way money is allocated and disbursed may be as important as (if not more important than) the total amount of funds spent. Weaknesses are apparent not only in the way in which the foundation approached its partnerships but also in its approach to implementing a new grantmaking strategy, which overwhelmed many of the grantees. The modest results of the initiative relate back to the lack of a strategy adapted to local conditions. Moreover, the foundation did not recognize that some of its target communities were not ready to absorb such high levels of resources. The JRCT case again highlights issues of time and timing, as well as the way in which the prevailing political climate is crucial in understanding the influence of campaigns – for good and ill. Political parties may be unfaithful allies, friendlier in opposition than in power. The bridge-building capacity of foundations may well be temporary in such circumstances and runs the risk of seeming particularistic or paternalistic as coalitions change. The Quaker faith and a high level of trust in the grantee were crucial factors in the foundation’s patience and persistence in a context of high uncertainty and unclear performance measures. KBF illustrates the way in which foundations may play a critical role as neutral conveners and knowledge entrepreneurs around a controversial and sensitive issue. In this case, KBF was also an important bridging institution between Belgium’s divided regions, Flanders and Wallonia. Thorough, credible research provided an important basis for subsequent work; choosing a respected chair lent further legitimacy to the deliberations and recommendations of the steering committee. However, the KBF case also again makes clear that change is often slow, requiring a favorable external environment and involving dependence on the actions of others over whom the foundation has no control. A foundation may have the power to do no more than prevent matters becoming even worse. The political sensitivity of the issue, as well as the foundation’s inability or unwillingness to become more directly involved with the politics of integration meant that the project was primarily concerned with agenda-setting and there were no defined concrete performance measures. Yet again, the Pew case shows the way in which the political landscape may determine whether or not a foundation program is successful in promoting

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meaningful change, and flexibility is paramount in a rapidly changing environment. While it is important to have ambitious visions, it is equally important to refocus priorities when lofty goals are unreachable. The case also highlights the importance of building on existing initiatives when goals are intricately tied to the politics of a state, to remain bipartisan in order to build a consensus among all stakeholders, and to be prepared to seize opportunities when a political opening presents itself. When it came to convincing energy corporations to support legislation on climate change, the success of the coalition was partly a product of the preexisting network and reputation of the director and therefore very person-bound. The RWJF case shows that preparatory research is invaluable but not enough alone; communication and dissemination are critical. Cross-sector collaborations may be very powerful. Yet again, timing plays an important role in the perceived success or failure of a program, and in this case, assessing the contribution of the foundation is further complicated by the problems of attributing impact in coalition-based approaches over a long period. The case also illustrates the need to take into account pre-existing trends and unintended consequences when assessing impact. The foundation took an opportunistic approach to its work and had no clear goals or performance indicators in mind; the idea was rather that every initiative would somehow make a difference. Similar to KBF, the foundation did not seek to sit at the negotiating table with government, as it felt this was not its place. So how do these observations from the case studies tie in with our discussion of foundations and the benign fallibility syndrome? We have argued that foundations’ greatest asset is their financial and institutional independence, and this is well illustrated in the cases presented. Cariplo, KBF, Pew, and RWJF, to name a few, were able to play roles, create networks, and take risks that other institutions could or would not. But their independence is also directly and indirectly related to what makes foundations susceptible to benign fallibility. Overcoming weak signals is one reason for the importance of thorough research and preparation, as well as the value of cross-sector and other coalitions – although, paradoxically, lack of knowledge, even naïveté, may sometimes be what enables a foundation to tread where others might fear to do so, as illustrated in the KBF case. Foundations clearly need to be constantly alert to complexity and dynamism. Weak signals are obviously a significant disadvantage when foundations are working in dynamic and complex conditions and addressing challenging issues. In addition, complexity and dynamism create further problems if the board wants fast and demonstrable results. Paradoxically, the desire for demonstrable results may stem in part from disjointed governance and weak signals, but that desire potentially exacerbates the problem of coping with complexity and dynamism. Foundations’ independence and, in most countries, charity laws combine with the benign fallibility syndrome to encourage a somewhat difficult relationship between foundations and “politics.” Foundations generally see themselves as apolitical, but this tends to mask their involvement with political matters and normative issues of a fundamental nature. As the Walton case most obviously demonstrates (but other cases also reveal), public good is a contested and political

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concept, and, in addition, the political context is very often crucial to the success or failure of foundations’ efforts to promote change beyond immediate grantees. The Pew, RWJF, and JRCT cases all illustrate the value of a supportive political environment, while, at different times, both KBF and JRCT demonstrate the costs of an unsupportive one. Kuenheim probably illustrates the “comfort” of a largely neutral political context. Time and timing are two of foundations’ greatest potential assets, but when combined with the benign fallibility syndrome and demands for demonstrable effectiveness, they can become difficult bedfellows. For example, the Cariplo case illustrates the value of foundations’ capacity to take the long view while the Hewlett case highlights the dangers of unrealistic time frames. The combination of weak signals and the complex principal-agent relationships characteristic of foundation governance make clear plans very attractive. Plans signal that all is under control and the foundation staff know what they are doing and where things are going; plans from grantees provide both comfort and accountability. But as many of the cases illustrate, flexibility to depart from the plan is often crucial to progress. Knowing when to depart and anticipating next steps is a key element of the proactive management approach we propose. Working in partnership with others can be an important way of extending networks, signals, and knowledge, thus overcoming some aspects of the benign fallibility syndrome. But working with others takes time, may be costly, and creates yet further ambiguity in attribution of outcomes. Before considering more fully how foundations might ameliorate benign fallibility, it is worth revisiting the argument so far and what options might be available.

The benign fallibility syndrome revisited We will revisit the benign fallibility syndrome by examining it from two perspectives that have informed the framework in the previous chapter and accompanied, sometimes implicitly, the presentation of the case studies and their analysis: principal-agency models, both contract and stewardship based, and organizational and management approaches that could be useful in addressing the syndrome and its implications.

Principal-agent-perspectives One way of looking at the benign fallibility syndrome is to see it as a variant of the principal-agent problem: given the disjointed governance structure, weak signals and weak incentives connect board and CEO as well as management and grantees. To appreciate how foundations could address the benign fallibility syndrome from this perspective, let’s first look at how business corporations deal with principalagent problems. The underlying basic principal-agent model is that of rational actors seeking to maximize their own utility at minimum cost. Accordingly, agency theory (Jensen

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and Meckling 1976; Fama and Jensen 1983) proposes two remedies: ex ante through measures such as bonus payments and other forms of profit-sharing, as well as stock and share options, and ex post via board monitoring. Both measures point to agreed-upon contracts between principal and agent. In this respect, Milgrom and Roberts (1992) propose four principles of good performance contracting: •

•

•

•

The informativeness principle (Holmstrom 1979) states that any available measure of agent performance should be considered in determining the level of compensation, i.e., the more information the better. The incentive intensity principle states that agents respond to incentives more when compensation varies with effort and not results alone; i.e., the diversified incentive structures are better. The monitoring intensity principle posits that the level of oversight and reporting are correlated with the level of incentives, i.e., the greater the incentives, the more elaborate the accountability requirements. The equal compensation principle establishes that principal and agent should share the same priorities in task completion; i.e., aligned priorities are better.

Could these principles be useful for foundations in overcoming signaling and incentive problems through elaborate contracts based on as complete an information base as possible? At first sight, it seems reasonable to take all relevant information into account when evaluating (informativeness principle). Preparatory research, solid planning, logic models, and good information and knowledge management systems are cases in point. However, referring back to Chapters 1 and 2, available information is affected by the information asymmetries arising from the disjointed governance structure and the very signal and incentive problems associated with the foundation form. This means that information may not be forthcoming in the same quantity and with the same reliability as in market situations. Likewise, it also seems reasonable to reward efforts and not only results (incentive intensity principle), especially as foundations can work in highly complex and dynamic fields where log frames soon fail as conditions shift and situations evolve. Additionally, in assessing rewards, satisficing and sense-making accounts come into play. Finally, in terms of monitoring intensity and the equal compensation principle, it seems that these principles assume a simpler principal-agent constellation than is the case for foundations with their typically disjointed governance structure between the board and CEO level and the program staff and grantees. The Milgrom and Roberts (1992) principles rest on two assumptions that limit their applicability in the context of the benign fallibility syndrome. First, the principles assume that performance efforts and results are at least indirectly measurable in terms of profits, returns on investment, or some other financial indicators. What if, as we have seen in some of the case studies, it becomes difficult to link expected results to performance, however carefully designed and detailed any such

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evaluation system might be, based on the four principles just discussed? What if the complexity and the dynamism of the organizational task environment create profound uncertainties? In such circumstances, analysts like Prendergast see clear limitations to how completely performance can be specified and measured: [I]n essence, complex jobs will typically not be evaluated through explicit contracts” (1999: 9). If such is the case, there may well be many situations where implicit understandings between boards and CEOs as well as program staff and grantees are as important as what is stipulated in contracts and grant agreements. The second assumption refers to the underlying zero-sum thinking of agency theory. It may not apply to the world of philanthropy generally and the disjointed governance structure of foundations in particular. Would stewardship theory rather than agency theory be more applicable? Donaldson and Davis (1991, 1994) seek to identify situations in which the interests of the principal and the steward are aligned or could become so through appropriate measures. The underlying assumption of stewardship theory is that both the principal and agent/steward behave such that pro-organizational behaviors are valued more (i.e., have higher utility for actors) than individualistic behaviors (Davis et al. 1997). For stewardship theory, the governance model for foundations, while based on rational action, is cast in a context where cooperative relationships between the board, management, and grantees may be of greater utility than self-serving behaviors. In this respect, Benjamin (2010) highlights the ways in which philanthropic relationships are not equivalent to accountability relationships in typical principal-agent scenarios. Rather “the philanthropic relationship may be better characterized as a relationship of mutual interest that addresses a common concern rather than a relationship of delegated authority” (Benjamin 2010: 392). Yet stewardship theory points to a tension, even contradiction: on the one hand, it suggests that the key to foundation performance is boards seeking a cooperative relationship with management and vice versa and likewise between management and grantees. On the other, research on foundation boards has shown that they are often far from engaged, are more passive than proactive, lean toward satisficing, and have a culture of yeah-saying indicative of the benign fallibility syndrome. Ostrower notes that “what various foundations do have in common is a pervasive failure to institutionalize a regular and ongoing process by which they establish standards and evaluate themselves in relation to these standards” (Ostrower 2004: 9). Similarly, Boris and Winkler (2013: 69) observe that “few foundations implemented internal processes to measure their own performance, or invested in evaluating their grantmaking programs.” We have to recall that such processes evolve in the weak-signal, weak-incentive context of foundation governance, meaning that mutual interest and even value commitments may be insufficient. So, what options do foundations have in the context of principal-agent models in trying to address the benign fallibility syndrome? One way would be to strengthen incentives and signals but less so via conventional performance-based contracting with individual CEOs, managers, and grantees. These can and do happen, but they fall short for the reasons specified earlier and additionally

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because of the over-ambitious and difficult-to-measure projects undertaken by many foundations. We have already identified some of the inherent problems in measuring foundation results – timing, attribution, unintended side effects, and so on. Within the thinking of principal-agent models, one option is to establish quasi-markets (Le Grand 2011) for clearer signals. Yet, quasi-markets have their disadvantages too, such as gaming and new kinds of information asymmetries with moral hazards. The stewardship model suggests incentive amplifications that go beyond the contractual incentives around financial rewards proposed by agency theory, in particular, the role of shared values and the responsibility for a collective good. Communities of values with a commitment to some greater common purpose can provide incentives in addition to monetary ones. For example, the Joseph Rowntree Foundation is grounded in Quaker values, and RWJF was sufficiently united and passionate in its mission to improve the health of the American people that it was prepared to take on a project that it knew would incur the wrath of the powerful tobacco industry. But communities of values, too, have their down-side and can lead to closed thinking, inertia, and paternalistic attitudes of “we know best.” In terms of amplifying signals, stewardship theory would suggest a certain self-discipline for boards. Ostrower writes, “Without voters or consumers to do it for them, foundations must impose a set of disciplines upon themselves to ensure that they are regularly and systematically evaluating their performance” (2004: 9) and proposes, for example, that foundations apply to renew their own funding by showing that it is an effectively functioning organization. Creating critical, independent public panels and listening posts are other ways of signal amplification, as are grantee surveys, e.g., “Learning from Partners” (CSI 2012, 2015), and organizations dedicated to improving the practice of professional philanthropy, e.g., Center for Effective Philanthropy (cep.org), Grantmakers for Effective Organizations – GEO (www.geofunders.org), and Grantcraft (www.grantcraft.org). Some foundations today are championing a movement dedicated not merely to listening to grantees but rather, or in addition to, listening to beneficiaries. Some are also experimenting with including “representatives” of user groups on the foundation board, e.g., young people, women, people of color, and so on. In both cases (listening to beneficiaries and board inclusion), there are obvious dangers of tokenism and selective representation (McCoy 2015; Twersky et al. 2013). In sum, it seems that agency theory offers few remedies that would be applicable to the world of philanthropy. Stewardship theory fares better, yet it too offers limited options to amplify signals and incentives unless the foundation is willing to take the risks that come with systemic changes, such as quasi-markets or normatively grounded communities of values. One major consequence of this insight, as we will stress further, is a proactive management style. By this, we mean an approach to governance and management cognizant of the form advantages and limitations of foundations. We see in a proactive style the potential to move foundations away from benign fallibility syndrome.

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Management perspectives We argued in a previous study (Anheier and Leat 2006; Leat 2016) that creativity, intimately linked to innovation and entrepreneurship, is one of a foundation’s most important roles – the pursuit of which may sit uneasily with assessment of performance in terms of success and failure. Notions of success and failure, arguably, encourage focus on the known rather than the unknown, bringing in low-hanging fruit, rather than the more complex, deep-seated, and difficult issues. Judged in terms of their innovation role and the comparative advantages they offer, foundations may be better characterized not as permanently failing organizations (see discussion in Chapter 2) but more accurately as permanently trying organizations. As the case studies have shown, some level of uncertainty is endemic in much philanthropic work. Rather than “buying” a ready-made product off the shelf or paying for results, foundations often support a service or activity that does not already exist; they buy “on spec” or off the plan. To put it another way, some foundations place bets on horses in a race where they don’t know the terrain, the weather, or the other horses. As shown, much foundation work is not only by its very nature uncertain but, in addition, is carried out in the context of the limitations of foundation governance previously discussed. Given this dual uncertainty, it may be unsurprising that foundations have taken up “strategy” and “strategic planning” with enthusiasm bordering on religious fervor. Arguably, the emphasis in foundation practice literature on strategy, risk management, and so on functions as a comfort blanket, giving an illusion of reduced uncertainty and lending an aura of rationalism to what is in reality something more akin to an heroic act of faith. The desire of foundations to measure “success” and “failure” – and to claim ownership of success if not failure – is both understandable and impossible. This does not mean that foundations’ interventions have no effects. As our cases illustrate, foundation activities do have effects, but trying to pin these down as either pure success or pure failures or as the result of some single intervention is to misunderstand the complexity of social change and the inherent ambiguity of foundation work. Of course, in some cases foundations can trace a direct line from intervention to output. For example, say a foundation funded 25 holidays for disadvantaged children or the building of 10 units of sheltered accommodation for elderly people. The foundation can say with certainty that the holidays were taken or the units built, but this does not tell us whether the foundation was successful in changing the lives or enhancing the well-being of the recipients. Where foundations pursue more ambitious goals – such as addressing climate change or reducing teen tobacco use – the relationship between intervention and outcome is more obviously complex and ambiguous. To understand how foundations can manage uncertainty and address ambiguity in the context of the benign fallibility syndrome, we refer back to our previous work on Creative Philanthropy (2006). There, following Kao (1991), we introduced

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a basic distinction between the capacity for creativity and the capacity for entrepreneurship. Creativity capacity means the ability of an organization to come up with new ideas and solutions, while entrepreneurship capacity is the ability of implementation, similar to innovation-diffusion processes described by Rogers (2003). The two capacities and respective role requirements are to be seen in the context of the organizational task environment in which a foundation operates. Some task environments require more creative or entrepreneurial capacities than others. A foundation bringing temporary relief to single parents living in poverty may require neither creativity nor entrepreneurship in its activities. By contrast, a foundation like the Walton Family Foundation might have to utilize both capacities for the charter school project to succeed. Similarly, RWJF’s tobacco project or Pew’s climate action required both capacities for success. Nor do creative and entrepreneurial capacities necessarily go together as requirements: a foundation seeking to discover artistic talent may require significant creative capacity and less in terms of entrepreneurial capacity; the Körber Foundation’s history project is one example of this type. By contrast, a foundation supporting business models in the arts may need more entrepreneurial than creative capacity. The community gardens project by the foundation Anstiftung & Ertomis is one example of this type as is the Mozaik initiative in BosniaHerzegovina and the Buttle Trust’s promotion of standards in higher education for the care of young people leaving care (see Appendix I). Referring to Table 4.1, we suggested that foundations engaged in conventional charity typically fit into the service philanthropy category, with little requirement for either creative or entrepreneurial capacities, the objective being to bring relief to the needy. These foundations provide a service of a known type to a known clientele. Other foundations might be closer to relay philanthropy, where more creative capacity but less entrepreneurial capacity is required. Such relay foundations help generate new ideas, solutions, and approaches but then, as in a relay race, leave to others the responsibility for doing something with those approaches. The KBF case of training imams fits this category. Yet other foundations are retail philanthropists – good at getting their approaches implemented but basically producing more of the same. The name retail philanthropy suggests that what seems to have worked in some settings or TABLE 4.1 Foundation types and capacity requirements

Creative Capacity

High Low

Entrepreneurial Capacity High

Low

Creative philanthropy Retail philanthropy

Relay philanthropy Service philanthropy

Source: based on Anheier and Leat (2006), Chapter 3

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locales can be applied in others. The Hewlett Foundation’s project on community improvement in different Bay Area cities would be one example of this type. The build-out function Hammack and Anheier (2013) identify with much of local philanthropy in the US is of this kind. Then there are creative foundations – organizations that are high on creative capacity and the capacity to get novel ideas, solutions, and approaches implemented and out into the mainstream, changing the way people and organizations think and work in addressing deep-rooted problems. As we argued in Creative Philanthropy, these are the foundations “that seek to cope with uncertainty and controversy; that promote, gather, disseminate, and develop knowledge; that reach across established disciplinary, organizational, and sector boundaries; and that allow room for experimentation” (Anheier and Leat 2006: 45). The fit between organizational task environment and capacities is critical here (see Chapter 2): foundations in high-uncertainty environments best meet requirements when commanding appropriate creative and entrepreneurial capacities, with a minimum of bureaucracy and a premium on flexibility and innovation. For goal achievement, managing uncertainty is key – as we have seen in the case of Pew, RWJF, and JRCT. It is also here that performance is most difficult to measure and outcomes most uncertain. The benign fallibility syndrome is most pronounced – and hence the need for proactive management clearest. By contrast, requirements for foundations in low-uncertainty environments are radically different: they are best organized as relatively bureaucratic organizations with a clear focus – bureaucratic for enhancing the efficiency of operations by minimizing transaction and operating costs and focused for maintaining goal directedness. Service foundations with a management style aimed at steady-state service provision fall into this category. Here, the benign fallibility syndrome may be less pronounced but also easier to detect; standard performance measures and reporting may suffice, provided the board and management discharge their governance functions. In between are foundations that operate under moderately high uncertainty. They have the challenge of finding a balance between bureaucracy for efficiency’s sake, i.e., keeping operational and grantmaking costs low, and flexibility for being able to cope with changing conditions. These can originate from high complexity for relay foundations and from high dynamism for retailers. As the case studies have shown, conditions can and do change. Some foundations starting in a retail mode found themselves in an environment that required the creativity of a relay foundation or vice versa. Like many parts of modern society, foundations’ worlds are becoming more complex and ambiguous as the wider environment becomes more uncertain. Uncertainty is increasing as the speed and multiplication, convergence, and connectivity of change grow (Syrett and Devine 2012).1 The “unknown unknowns” are increasing. Courtney et al. (1997) identify four levels of residual uncertainty: 1

Clear enough future – in this scenario, it is possible to develop a single forecast that will not be exact but will be good enough to allow development of

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2

3

4

strategy. Arguably, this was the level of uncertainty encountered in the Calouste Gulbenkian and Buttle Trust cases. In terms of the preceding discussion, “clear enough futures” suggest relatively low-complexity and low-dynamism environments. Alternative futures – here the future can be described in terms of a few alternate scenarios. Which scenario will unfold is uncertain, but it may be possible to identify probabilities. Arguably, this was the level of uncertainty faced in the JRCT and Theresienthal cases. In terms of the preceding discussion, “alternative futures” suggest environments of moderate complexity and dynamism. Range of futures – here, the likely futures are defined by a limited number of key variables; the actual outcome can lie anywhere within a range bounded by those factors. Arguably, this was the level of uncertainty encountered in the Robert Wood Johnson Foundation and Cariplo cases. “Range of futures” suggests environments characterized by higher dynamism and complexity. True uncertainty – in these situations, multiple dimensions of uncertainty interact to create an environment that is virtually impossible to predict. Arguably, this was the level of uncertainty that applied in the Pew and KBF cases. “True uncertainty” is characteristic of high-complexity and dynamism environments.

So, foundations encounter different levels of uncertainty, but they also have a range of meta options available. As Reeves (2016) notes, different environments require different approaches. The “clear enough” future lends itself to the traditional, classical approach of analysis, planning, and execution against a threeto five-year plan. This is probably the approach adopted by many foundations today – even if the future no longer comes into this category. Reeves’s other approaches include adaptive, visionary, shaping, and renewal. An adaptive approach involves adapting or iterating a way forward by engaging in disciplined experimentation. A visionary approach involves envisioning and realizing new possibilities and is best suited to malleable environments. Shaping involves orchestrating the activities of entire ecosystems; renewal is the approach best suited to situations in which there are shocks to the system or competing developments, which suggest a need for transformation. Arguably, Cariplo adopted a visionary approach in a situation in which there was a range of futures, whereas Calouste Gulbenkian (see Appendix I) employed an adaptive approach in a “clear enough future.” Kuenheim arguably adopted a shaping approach, whereas KBF’s approach lay between shaping and renewal. Pew’s approach might be described as visionary or renewal. Which approach was adopted by each foundation is open to debate. The important point is that the cases involved futures of varying degrees and types of uncertainty and foundations adopted subtly different approaches.

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Toward proactive management Despite these differences, are there any common messages? The business literature on managing in conditions of uncertainty is remarkably consistent (see, for example, hbr.org/topic/managing-uncertainty). There is emphasis on the following actions: •

•

•

•

•

Accept the inconvenient truth that you cannot control everything. For example, RWJF accepted that addressing teen tobacco use was very risky and involved taking on powerful lobbies it certainly could not control, but it was aware that its independence enabled it to take this risk. RWJF was aware of its strength (independence) and addressed its weaknesses by thorough research, adapting and adopting multiple approaches, and collaborating with others. JRCT put faith in the talents of their grantee and took a hands-off approach, accepting that failure is part of the process. Avoid simplistic causal models trying to control individual behavior and instead seek to shape the context for that behavior. Again RWJF provides an example here; in the early stages of the program, the foundation sought to explore links between the price of tobacco and levels of use, shaping the context by use of pricing and tax mechanisms. Unlike government, foundations do not have the legitimacy or the tools to control individual behavior, but they may have the resources and the voice to advocate for changes in contexts. Walton learned that transposing its model for school reform onto communities was too simplistic to result in meaningful change and adjusted its strategy accordingly. Adapt to ambidexterity and built in redundancy (i.e., the ability to apply different and potentially conflicting approaches to strategy). For example, Cariplo, Pew, RWJF, and KBF all adapted as they went along and worked on different fronts concurrently and consecutively. In contrast, Walton displays a resistance to supporting alternative approaches to school reform that are more considerate of inequality and social justice. Foundations’ independence means that their strengths include their capacity to take the long view, to back several horses simultaneously and to be “inconsistent” in ways governments typically find difficult. This may also be where their disjointed governance structure becomes an advantage. Invest in political and economic intelligence. Remember that a macro event can have a greater impact than a micro or internal event. For example, JRCT was well aware of the political positioning before and after the election and its potential implications for the program. Pew seized the opportunity of an administration that was open to climate change legislation to gain bipartisan support for a bill that made it to the floor of the House of Representatives. Expect the unexpected, and reduce uncertainty. Collect signals and imagine “What if?” Take precautionary action. For example, RWJF and Pew worked on a range of concurrent projects, and, rather differently, Walton changed its approach when things became politically contentious. Mozaik’s lack of foresight with regard to severe weather conditions led to several costly setbacks.

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•

•

•

•

Be prepared to seize opportunities – as the Kuenheim case clearly illustrates. Foundations’ independence and relative lack of accountability means that, in theory, they can be flexible and opportunistic. Both Pew and RWJF seized opportunities to build on existing initiatives, particularly while seeking policy changes on the state level. Pay attention to diversity. Foundations’ tendency to suffer from weak signals means that they must be constantly attentive not merely to similarities but also to differences between projects, places, people, and cover time. Arguably, in different ways, at times, both Hewlett and Walton failed to do this. KBF illustrates how a lack of awareness vis-à-vis diversity can lead to unrepresentative bodies potentially risking the marginalization of certain groups. Create feedback loops and adaptive mechanisms. Again, foundations can potentially reduce the danger and damage of weak signals by deliberately building and nurturing good feedback channels and adaptive capacity. Cariplo and KBF both illustrate these qualities particularly clearly; both designed their programs to explore, experiment, and adapt. Foster trust and reciprocity. The fact that foundations are financially independent and politically unaligned, existing on the margins of the corporate, government, and nonprofit sectors, means that they are in an ideal position to build on trust and reciprocity. The Kuenheim, Pew, KBF, JRCT, and RWJF cases, among others, all illustrate the value of trust and the capacity to build reciprocity.

These principles are somewhat different from many foundations’ current assumptions, thinking, and practice. The current assumption is that more and better planning leads to better outcomes, whereas the preceding principles suggest that uncertainty is certain and some things cannot be planned or controlled. Current reliance on due diligence prior to the grant and emphasis on the “good” application as one that has a clear and feasible plan made in advance is different from expecting the unexpected, collecting signals, and imagining “What if?” The current emphasis on focus on a small number of carefully defined priorities and approaches stands in contrast to cultivation of adaptation and ambidexterity, hedging bets, having several pots on the boil, and being ready to seize opportunities. The current culture of lean, mean, and efficient is at odds with emphasis on built-in redundancy and investment in social, political, and economic intelligence. The current tendency to treat feedback as a routine matter of minimum accountability contrasts with the idea of feedback as genuine learning and in-the-moment intelligence. Fostering trust and reciprocity with a wide range of organizations contrasts with the current tendency to focus attention on relationships with current grantees. So, what does this mean for foundation trustees and managers? We have already noted various tensions in the governance structure of foundations, between donor and trustees, between trustees and managers, between managers and grantees. Foundations face a fundamental dilemma in interpreting the founder’s deed. Many deeds contain missions that are highly generalized – “the welfare of mankind,” “the health of the nation,” “the promotion of education,” and so on. While

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such very diffuse missions have important legal advantages (e.g., they are unlikely to be achieved or become outdated), they are also heroically ambitious. The dilemma for the donor is thus: a specific, achievable deed that may become redundant or a broad, non-specific deed unlikely ever to be achieved or outdated. The predicament for the trustees is how to operationalize such hugely ambitious, diffuse missions. The foundation’s mission may be operationalized in a way that either simply responds to (applicant) demand or picks off some specific element of the whole; an example of the latter approach might be operationalizing a “health of the nation” deed by focusing on funding hospice care for terminally ill people or similarly specific activities. This approach generally means that the foundation’s achievements are measurable (x $ to y hospices caring for z people) and attributable (the foundation’s funding supported 50% of the total number of patients). This is the world of service philanthropy. But although the foundation’s specific contribution may be measurable and attributable, the extent to which the contribution furthers the overall mission of the foundation is highly debatable. Such specific activities may also be criticized as confined to a very small number of beneficiaries, doing little to achieve more sustainable, longer-term change for all terminally ill people now and in the future. Furthermore, such a specific interpretation arguably fails to make use of the endowed foundation’s only unique resource: its independence. If, however, trustees operationalize the deed in a way that comes closer to the founder’s intent and seeks to achieve sustainable change with impact beyond immediate grantees, then the foundation is likely to encounter a string of new problems. The foundation does not have the financial resources or the power to achieve its goals alone; it must work directly and indirectly with and through others. Therefore, its contribution is likely to be difficult to measure and the outcome unattributable to any one party and, in any case, related to a host of supportive and obstructive wider environmental and other factors. In short, in operationalizing the deed, trustees face a choice between the modest and more measurable and the ambitious and ambiguous. Both approaches are hampered to a degree by a foundation’s inherent difficulties in receiving information from its environment (weak signals) discussed previously. But the second (change) approach is hampered not only by weak signals from grantees but also by many foundations’ cultural and historical resistance to investment in learning; in high-quality social, economic, and political intelligence; and in keeping up to date with analysis of the complexity of how social change happens. A further barrier is some foundations’ hope – or fantasy – that widespread social change can be achieved without “politics.” Based on our thesis and insights from the case studies, we suggest a number of recommendations for boards, managers, grantees, and evaluators. Taken together, these points amount to what we see as the proactive management style needed for overcoming the benign fallibility syndrome. In essence, by this, we mean an approach to governance and management cognizant of the form advantages and limitations of foundations. It is not an approach lodged with one component of the foundation’s governance structure alone. Within the foundation, proactive management has to involve all major stakeholders (Boxes 4.1–4–4).

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BOX 4.1 BOARDS: OPERATIONALIZING THE DEED •

• • •

• • •

• • •

Think beyond money; identify gaps and consider potential roles for the foundation: innovation, complementarity, substitution, and build-out. Be aware that innovation is the more challenging role to measure. Capitalize on the foundation’s independence – this is your greatest potential asset. When identifying programs / areas of work, consider complexity and dynamism, salience, and style. Decide the level of uncertainty you can tolerate. Foundations with a high need for demonstrable impact may prefer to work as service philanthropists in stable, nonpolitical, and less complex task environments. Consider multiple iterations, anticipating plan b, c, d, and even e; embrace redundancy. Distinguish between politics and policy, and understand your role in response. Be aware of foundations’ tendency to satisficing – but at the same time, consider the implications of pursuing a goal to the very end (e.g., rising costs of addressing the last 10 or 20% of the task, the dangers of “silting up” with no spare capacity for new work). If program evaluation and performance measurement are proposed, always ask why and what for. Don’t let a focus on measurable outcomes stifle risky ventures – remember, you can afford to fail. Be aware of the tendency to mimetic isomorphism (following the fashion) – consider the possibility of being different!

BOX 4.2

• • • • •

BOARDS AND STAFF: OVERCOMING WEAK SIGNALS – BUILDING KNOWLEDGE

Analyze problems and issues; look for complexity and “nestedness.” Be aware of satisficing tendencies, and understand how systems work. Identify likely change makers and change mechanisms. Invest in ongoing social, political, and economic intelligence. Identify feasible roles the foundation can play (innovation, complementarity, substitution, and build-out).

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BOX 4.3 STAFF: OVERCOMING WEAK SIGNALS – BUILDING RELATIONSHIPS • •

• • •

Develop relationships and regular communication channels with potential and current applicants, grantees, and beneficiaries. Beware tokenism (“we have a disabled/young/low-income person on the board”) and false confidence (“we know what’s going on – we talk to all of our 750 grantees”); consider talking to non-grantees (as the Ford Foundation realized, non-grantees are likely to be the source of the foundation’s very weakest signals). Identify key partners and allies and work with them. Know the field inside out, and invest in and share regular reliable ongoing intelligence. Develop strong functioning feedback loops, and use them to inform future actions.

BOX 4.4

•

• • • •

• • • •

•

BOARD AND STAFF: WORK WITH COMPLEXITY

In deciding on new programs / areas of work consider the level of complexity and dynamism of the field and the likely implications for resources, time scales, potential conflict/criticism, and “success”/”failure.” Remember too that levels of complexity and dynamism of a given field may change over time. Similarly, assess the salience and style of a field and likely implications in terms of approach. Be prepared to change styles – combine cooperation and confrontation if necessary. Ditch the linearity and certainty bias (Patrizi et al. 2013) – don’t frame strategies as linear, causal, and certain. Develop resilience, i.e., the ability to absorb strain in the face of adversity, to bounce back from untoward events, and to learn and grow from previous resilience ( Weick and Sutcliff 2007 ). Be opportunistic and adaptive – develop agility. Be prepared to trust grantees and others to change the plan. Build in redundancy – “have several pots on the boil” from plan B to E. Focus on what happens rather than on pre-determined outcomes; beware the autopilot effect and indicator blindness, and learn from what really happens in implementation (Patrizi et al. 2013). Don’t let a focus on outcomes stifle risky ventures – remember, you can afford to fail (see above).

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• • •

Recognize the value of incremental improvements in practice rather than always seeking dramatic innovation. Be aware of foundations’ tendency to satisficing (see above). Consider ways in which the foundation’s advantage of being able to take a long view can be combined with avoiding the associated inertia.

Then, there are the grantees. The implications of our cases for grantees bring to mind Hans Christian Andersen’s story of the emperor’s clothes. The emperor riding around town with nothing on believing that the villagers were admiring his wonderful new suit was the victim of an extreme and perverse case of weak signals. No one was prepared to break ranks and tell the emperor that he was not dressed as he imagined – was not even dressed at all. Like the villagers, grantees collude in the fantasies of the rich. Grantees could play a crucial role in addressing foundations’ problems of weak signals – but to do so alone would require bravery bordering on self-sacrifice. Grantees’ need to be honest – with themselves and with foundations – that they cannot achieve miracles in next to no time and what they can achieve is highly contingent on a range of more or less unpredictable and uncontrollable factors. But while foundations and other donors (including the general public) continue to favor hope over reality, an organization would be very brave to suggest that it might be able to achieve X in three years while other applicants are confidently promising to be able to do so. Similarly, some grantees do indeed contact a funder to say that the original plan no longer seems feasible and request permission to vary the grant to pursue some other route to the desired outcome. Others may hesitate before doing so, fearing that an admission that plan A was wrong may look like incompetence and may require what is in effect a new grant application and another committee decision. Again, the grantee that tells its funder that the grant achieved next to nothing is a rare, heroic beast. Collectively, grantees and foundations together may be able to improve communication among themselves, but it seems unlikely that much can be achieved alone. Larger foundations regularly bemoan the lack of learning from “mistakes” but getting grantees – and foundations – to put “mistakes” in writing is an uphill battle. One of the problems may be that, as our cases suggest, the language of success and failure is inappropriate. “Complexity,” “contingency,” and “ambiguity” are the key words. With the rise of demonstrated performance, the role of evaluators of grants and grantees has become more important. As foundations have become more concerned with their “effectiveness” – or perhaps more accurately the effectiveness of their grantees – evaluation of foundation-funded projects and programs has become more common. Evaluators come from different professional backgrounds, have more or less knowledge of the foundation and nonprofit worlds, and adopt different frameworks and metrics in their work. Despite these differences, our cases have some general implications for evaluators (Box 4.5).

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BOX 4.5 EVALUATORS • • • • • • • • • • •

• • • • • • • •

Be clear about your unit of analysis. Timing is important – when you judge a program’s success or failure may be critical. Distinguish contribution from attribution. Beware indicator blindness (Patrizi et al. 2013) – look at what happens and not only at what you expect to happen. Identify multiple stakeholders and multiple and often mixed outcomes. Be alert to unintended consequences. Assess levels of complexity and dynamism in any given field/program, and adapt approaches and metrics accordingly. Assess prevailing salience and style in any given field/program, and adapt approaches and metrics accordingly. Pay attention to the social, political, and economic context, including factors over which the foundation has no control. Be aware of the multitude of interventions potentially interfering with the reception of each other (Pawson et al. 2011). Be aware of the different roles adopted by foundations (innovation, complementarity, substitution, and build-out), and design approaches and metrics accordingly. Be alert to the “silent mover” role foundations sometimes adopt. Take account of contexts and mechanisms rather than merely outcomes. Preventing something becoming worse (i.e., staying still) may count as success. Beware “fake handbags” – badly designed research is often the best friend of “success” (Astbury 2013). Be aware that “evidence” usually has a limited shelf life. See “the evidence” as a never-ending network of conditionality and contingencies (Pawson et al. 2011). Think less about what works and more about what works, for whom, under what circumstances. Consider outcomes through varied value lenses.

While we regard the proactive approach to governance and management as the key for addressing the benign fallibility syndrome, there are also important roles for foundation associations and support organizations, as well as foundation leaders. They could do much to encourage sector awareness and debate of key strengths and associated weaknesses, which we have encapsulated in the benign fallibility syndrome. Associations and support organizations and leaders in the field might also encourage foundations to share, discuss, and challenge theories of

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change, foundations’ roles, and the analysis of dynamism and complexity, salience and style. Similarly, associations and others might do something to ameliorate weak signals by encouraging regular meetings between foundations and nonprofits (not just grantees) and other parties across sectors and, where feasible, beneficiaries. Again addressing weak signals, associations, and others might encourage foundations to invest in shared intelligence gathering regarding social, economic, and political contexts and trends nationally, regionally, and locally, both generally and in relation to particular issues. Some foundations gather such information for themselves, but more could be done to share and compare across the sector. Associations, and others in the foundation sector, regulators, and academics also have an important role to play in challenging some of the assumptions and simplifications of the performance measurement and evaluation industry, as well as encouraging analysis of differences in the complexity, dynamism, salience, and style of issues and contexts and discouraging the simple language of “success” and “failure.” Regulators and policymakers need to consider carefully the social and political implications of encouraging mimetic pressures toward measurement, thus risking the loss of the only social institutions that have the freedom to challenge, to dare to be different – and to fail. If real innovation necessarily implies the freedom to fail, insistence on measurement and “success” risks suffocating the goose that lays the golden eggs. We end this book with a telling quote from Hirschman (1967: 13), who like us, struggled with simplistic notions of success and failure and marveled at the complexity and even unpredictability of social life: While we are rather willing and even eager and relieved to agree with a historian’s finding that we stumbled into the more shameful events of history, such as war, we are correspondingly unwilling to concede – in fact we find it intolerable to imagine – that our more lofty achievements, such as economic, social or political progress, could have come about by stumbling rather than through careful planning . . . Language itself conspires toward this sort of asymmetry: we fall into error, but do not usually speak of falling into truth. This may well be the epitaph for the ongoing debate about the performance and the contributions of foundations addressing complex problems: they can afford to stumble and to keep trying, and the extent to which they succeed or fail may well be in the eye of the beholder.

Note 1 See Mowles (2015); see also Courtney et al. (2000). The defense and intelligence community refer to this as a VUCA world: volatile, uncertain, complex, and ambiguous (Tonurist and Cook 2017). Similar analyses come from McFarland (2012).

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McFarland, W. (2012). This Is Your Brain on Organizational Change. Harvard Business Review. Retrieved from https://hbr.org/2012/10/this-is-your-brain-on-organizational-change Milgrom, P., & Roberts, J. (1992). Economics, Organization & Management. Englewood Cliffs, NJ: Prentice Hall International. Mowles, C. (2015). Managing in Uncertainty: Complexity and the Paradoxes of Everyday Organizational Life. London; New York, NY: Routledge. Ostrower, F. (2004). Attitudes and Practices Concerning Effective Philanthropy. Washington, DC: The Urban Institute, Center on Nonprofits and Philanthropy. Patrizi, P., Heid Thompson, E., Coffman, J., & Beer, T. (2013). Eyes Wide Open: Learning as Strategy under Conditions of Complexity and Uncertainty. The Foundation Review, 5(3), 50–65. Pawson, R., Wong, G., & Owen, L. (2011). Known Knowns, Known Unknowns, Unknown Unknowns: The Predicament of Evidence-Based Policy. American Journal of Evaluation, 32 (4), 518–546. https://doi.org/10.1177/1098214011403831 Prendergast, C. (1999). The Provision of Incentives in Firms. Journal of Economic Literature, 37(1), 7–63. Reeves, M. (2016). The World Just Got More Uncertain and Your Strategy Needs to Adjust. Harvard Business Review. Retrieved from https://hbr.org/2016/11/the-worldjust-got-more-uncertain-and-your-strategy-needs-to-adjust Rogers, E. M. (2003). Diffusion of Innovations (5th ed.). New York, NY: Free Press. Syrett, M., & Devine, M. (2012). Managing Uncertainty: Strategies for Surviving and Thriving in Turbulent Times. Hoboken, NJ: John Wiley & Sons. Tonurist, P., & Cook, J. (2017, March 7). A Debate about Uncertainty, Held in the Heart of Certainty. Retrieved 28 February 2018, from www.oecd.org/governance/observa tory-public-sector-innovation/blog/page/adebateaboutuncertaintyheldintheheartof certainty.htm Twersky, F., Buchanan, P., & Threlfall, V. (2013). Listening to Those Who Matter Most, the Beneficiaries. Retrieved 27 February 2018, from https://ssir.org/articles/entry/ listening_to_those_who_matter_most_the_beneficiaries Weick, K. E., & Sutcliffe, K. M. (2007). Managing the Unexpected: Resilient Performance in an Age of Uncertainty (2nd ed.). San Francisco, CA: John Wiley & Sons.

Appendices

Program

The Annenberg Challenge

The Migrants’ Rights Network

Phineo

Foundation

Annenberg Foundation, USA

Barrow Cadbury Trust, GRB

Bertelsmann Foundation, DEU

To give migrants space to voice their views and experiences and to advocate a rights-based approach in the field of migration policy To strengthen civil society by serving as intermediary between potential donors and nonprofit organizations

To combine resources and ideas to increase effectiveness of public schooling

Program Objectives

Lack of a guiding strategy, funding requirements diverted funds from other nonprofits, outdated theory of change

Made incremental changes to public school organization but did not achieve substantial improvements in student performance Success of the network was unclear, evolved from smallscale project to mid-size organization, as income base grew more than tenfold in relatively short period Organizations that were analyzed a second time since 2012 demonstrated significant improvements in transparency

(Continued)

New focus strengthened by experienced leadership, long-term involvement of key participants, hostile political environment restricts success Recruitment of external partners had costs and benefits, growth created trade-offs between being “established ways” and maintaining the spirit of innovation

Key Issues

Performance

For complete case studies, please consult case collection online: https://tinyurl.com/ycwkf4nd.

The cases

APPENDIX I

Program

Buttle UK Quality Mark for Care Leavers

The Immigrant Doctors’ Recognition Project

Social Microcredit Programme

A New Start for Theresienthal

Foundation

Buttle UK, GRB

Calouste Gulbenkian Foundation, PRT

Compagnia di San Paolo, ITA

Eberhard von Kuenheim Foundation, DEU

(Continued)

To support the entrepreneurial activities of clients who were incapable of offering guarantees and to receive conventional banking loans To revitalize the insolvent manufacturer of crystal glass

To support the recognition process of immigrant doctors

To improve opportunities for and experiences of higher education for care leavers

Program Objectives

Factory is running again and over 20 employees returned to their workplace

Strategic partnerships and strong leadership, favorable policy context that allowed foundation to capitalize on opportunities

Developed “quality mark” adopted by 56% of universities, considered best practice now by government, but debatable effects on care leavers’ choice of university During first phase 107 of 120 doctors recognized and employed; later replicated with less success Economic crisis led to growing need for credit, success inconsistent across regions, project was forerunner of larger microcredit initiative, launched in 2014

Possible to foster entrepreneurship in unlikely place under difficult circumstance, foundations are not selfinterested and therefore considered reliable partners

The foundation is a powerful player and well-networked in Portugal, joint project with government for added leverage Network of reliable project partners, strong human resource strategies, supply of tools instead of readymade solution

Key Issues

Performance

Social Housing

Service Learning

Easy Street (“Lugna Gatan”) Program

Campaign for Freedom of Information

Fondazione Cariplo, ITA

Freudenberg Foundation, DEU

Fryshuset, SWE

Joseph Rowntree Charitable Trust, GRB

To convince British government to introduce the Freedom of Information Act (FOIA)

To reduce violence and crime among young people in Stockholm’s most segregated neighborhoods

To experiment with innovative solutions for financing, constructing, and managing economically sustainable social housing To promote service learning and democratic competences / practical skills in German schools New initiative not widely implemented due to unclear rationale, schools and students could not be convinced of sustainable gain through the practice of service learning

Nationwide network “Lernen durch Engagement” was developed, did not lead to systematic change in German education system, only 100–200 schools implement practice Social impact as labor market program, impact on crime rates more contested, overall considered a successful anti-youth-crime project First draft of the FOI bill unsuccessfully introduced (1991), watered-down FOIA gained Royal Assent in 2000, campaign considered important influencer

(Continued)

Close long-term relationships with grant recipients, foundation criticized for engaging in political campaign, testing the limits of existing charity laws

Young people not only target group but integral part of the project, ability of storytelling increased success.

Illustrates foundation role as innovator, making links across sectors and challenging private and public institutions

Policy influence in addition to direct benefits in provision of housing, used as model for element of National Housing Plan

Program

The Training of Imams

History Competition of the Federal President

EkoMozaik

Foundation

King Baudouin Foundation, BEL

Körber Foundation, DEU

Mozaik Foundation, BIH

(Continued)

To enhance understanding and integration of Muslim communities in Belgium – specifically via understanding of the training of imams To spark interest of young people in their own history, promote independent thinking, and strengthen students’ sense of responsibility To create employment and integration via an economically sustainable business in a poor rural area

Program Objectives

Key Issues Islamophobia increasing due to wider factors, example of a foundation taking on an issue government could not / would not touch

Prizes tend to be low risk and high profile; in terms of the immediate output, the foundation cannot lose; cooperation with political leaders heightens visibility It has provided employment, and it has had some integrative effects – but economic sustainability hampered by location and events beyond the project’s control

Performance Various positive developments in the training of imams and recognition of Islam, very difficult to attribute changes

In 40 years, more than 136,000 young Germans participated, criticism due to connection between education and tobacco industry A very ambitious project in a very difficult environment – unclear as yet if the business can be self-sustaining

Central European University

Global Warming and Climate Change Program and Pew Center on Global Climate Change

The Tobacco Use Programs

Open Society Foundations, USA

Pew Charitable Trusts, USA

Robert Wood Johnson Foundation, USA

Adapted over time, basically to change policies and practices in order to reduce greenhouse gas emissions To reduce tobacco use in the US, primarily among children

To create an independent and academically reputable institution to promote an open society

Collaborative and changing program, some successes but arguably easy wins and impossible to attribute successes, tobacco companies turned attention to third world markets – so arguably problem not so much solved as exported

Leading academic institution in Central and Eastern Europe, difficulties in identifying its mission/ direction, accusations of funding “liberal extremism” Various “successes” over a 13-year period but attribution to Foundation not clear

(Continued)

Adaptive strategy in a largely favorable policy environment but in face of a powerful industry lobby

Complex program that adapted as it went along – in relation to changing policy environment and its own perceived progress

Philanthropy with political agenda runs the risk of conflicting with domestic government policies

Program

Stiftung Interkultur: Intercultural Gardens Movement

Charter Schools Funding

Neighborhood Improvement Initiative

Foundation

Foundation anstiftung & ertomis, DEU

Walton Family Foundation, USA

William and Flora Hewlett Foundation, USA

(Continued)

To improve K–12 outcomes for all students especially those of limited means by ensuring access to highquality educational choices (charter schools) To strengthen longterm capacity of the community foundations and neighborhood organizations to sustain change

To create a platform to facilitate intercultural community gardening

Program Objectives

Role in testing and pioneering new approaches, experiences served as lessons learned for other foundations, unrealistic expectations created tensions with partners

Indirect approach can be successful, brings together two unrelated issues in creative way, role in amplifying what might otherwise remain isolated experiments Highlights fact that public good is a contested concept; a foundation may achieve objectives but be criticized for the nature of those objectives

Project increased political recognition of urban gardens, has a low-key approach, does not aim to force social change

Increase in charter schools in US but debate as to whether these really improve outcomes for all K–12 students, varying quality research and moving goalposts Project had mixed results across three neighborhoods, some positive changes but problems due to inexperienced partners and lacking theory of change

Key Issues

Performance

APPENDIX II Case-overarching questions

1) RWJF and KBF Both KBF’s work on the Training of Imams project and RWJF’s campaigns against the tobacco industry were politically sensitive and took place in complex environments, though RWJF’s environment was more dynamic given the longer time frame. Both foundations believed it was not their place to negotiate with government but were willing to take risks – RWJF risked its reputation by pursuing a stigmatized issue and going against a powerful industry, while KBF risked stigmatizing an issue by funding research that the government was unwilling to pursue. The issues that KBF and RWJF worked on dealt with complex human behaviors that are difficult to change; however, whereas RWJF remained committed to fighting tobacco for nearly 20 years, KBF ended its work on Muslim integration after less than five years, although the issues remained largely unresolved. 1a What reasons lie behind the willingness of both foundations to take these risks? What risks was RWJF willing to take that KBF was not? 1b What are some of the key differences that might explain this? What role do timing, context, and governance play? Are there any takeaways for philanthropy?

2) Pew and RWJF Both Pew and RWJF worked on their respective issues over the span of about 20 years on programs that underwent several changes throughout this time. At some point, both were aiming for legislative changes on both the state and national levels; RWJF failed at first but ultimately contributed to legislation that helped bring tobacco under FDA control, albeit with fewer controls than intended. Pew, for its part, played a role in the approval of a bill on emissions trading in the House of Representatives, which failed to go further.

196

Appendices

2a Discuss the different challenges that both foundations had to confront. How could the outcomes be construed as both success and failure? 3b How did Pew’s and RWFJ’s approach to managing risk differ? 3c Both Pew and RWJF took advantage of their dual independence by indirectly lobbying the state and federal governments to make legislative changes. What tensions does this create within a democratic society?

3) Hewlett and Walton Both foundations were and are seeking to combat the effects of poverty, though Walton is attempting to do so on a much larger scale. The principles behind both interventions are rooted in putting power directly in the hands of communities; Hewlett believes that empowering underserved communities to be part of the solution leads to more robust results, while Walton is a firm believer in school autonomy and allowing parents to decide on the curriculum for their children. In both cases, the theories of change are either lacking completely or unclear. While Hewlett has largely acknowledged its shortcomings and mistakes, Walton still firmly believes in its approach to school reform as a means to lift people out of poverty. 4a Pretend you were one of the program officers working on community-wide changes and local empowerment for the Neighborhood Improvement Initiative over the course of 10 years. Given your rich experience with underserved communities, you have been asked to advise Walton on its new K–12 education strategy, specifically on taking a more holistic approach to change. What advice would you give them?

4) JRCT and Pew As in the case of RWJF, both foundations supported their grantee/program over the course of at least 20 years – Pew from 1990 to 2011 and JRCT from 1989 to the present. During this time, many different political changes took place and administrations had various degrees of interests in the foundations’ respective agendas. As we have seen, subsequent governments have tried to undermine the work or the legacies of both foundations. 5a Discuss the costs and benefits of taking a long-term approach to a problem. What opportunity costs should be considered? What value judgments need to be made?

5) Compare and contrast Cariplo and Mozaik Both created public partnerships with government for the use of land and had multiple goal structures that were a mix of economic and social. Cariplo sought to provide a small return on investments in social housing (which has yet to be seen),

Appendices

197

while Mozaik aimed at creating a self-sustaining social enterprise. In the end, it was the social dimensions of both projects that were most successful. 6a Describe the major challenges of having a multiple goal structure that is both social and economic. Can these be reconciled without one aspect undermining the other? How can foundations cope with these built-in tensions?

INDEX

Note: Page numbers in italics indicate figures and in bold indicate tables on the corresponding pages. adaptation and ambidexterity 179 agency theory 170 amateurism 45; and information asymmetries 86 ambidexterity 178 ambiguity 3–4, 183; constructive 4, 5, 7, 28; Eberhard von Kuenheim Foundation, Germany 161–163; Fondazione Cariplo, Italy 111–113; Joseph Rowntree Charitable Trust (JRCT), UK 132–134; King Baudouin Foundation (KBF), Belgium 86–88; Mozaik Foundation, BosniaHerzegovina 141–142; of performance 19, 34; Pew Charitable Trusts, US 97–99; Robert Wood Johnson Foundation (RWJF) 122–125; Walton Family Foundation, US 53–54, 70; William and Flora Hewlett Foundation, US 149–150 American Cancer Society (ACS) 117, 119 American Clean Energy and Security Act of 2009 (ACES) 97, 98 American Enterprise Institute for Public Policy Research 72 American Lung Association, and American Heart Association (AHA) 119 Americans for Non-Smokers Rights 119 Anheier, Helmut K. 21n1, 46n1, 176 Annenberg Foundation, USA 189 Annie E. Casey Foundation 67

Anstiftung & Ertomis 175 Anti-Discrimination Act 86 Apple Inc. 8–9 Association of Charitable Foundations 10 Association of German Foundations 10 Association of Italian Savings Banks and Foundations (ACRI) 106 associations 12, 21, 76, 184–185 audit society 11 Australian Center for Social Impact 10 autonomy 1, 21, 27 Aventis Foundation’s TB Free 39 Aydin, Ulvi 155 Barona, Villaggio 111 Barrow Cadbury Trust, GRB 36, 37, 189 benign fallibility syndrome 1, 2, 5, 12–17, 27, 51–53; Eberhard von Kuenheim Foundation, Germany 55–56, 161–163; Fondazione Cariplo, Italy: FHS and social housing 54, 111–113; framework 56–58; Joseph Rowntree Charitable Trust (JRCT), UK 54–55, 132–134; King Baudouin Foundation (KBF), Belgium 54, 86–88; lessons learned 166–170; management perspectives 174–177; Mozaik Foundation, BosniaHerzegovina 55, 141–142; Pew Charitable Trusts, US 54, 97–99; principal-agent-perspectives 170 –173;

Index

proactive management 178–185; Robert Wood Johnson Foundation (RWJF), US 54, 122–125; Walton Family Foundation, USA 53–54, 70; William and Flora Hewlett Foundation, US 55, 149–150; yeah-saying indicative 172 Benjamin, L. M. 172 Berridge, G. 4 Bertelsmann Foundation 189 Bill and Melinda Gates Foundation 67 BMW Group 152 Boards: deed, operationalizing 181; and staffs, complexity 182–183; and staffs, knowledge building 181 Boris, E. T. 10, 172 bravery bordering 183 Brest, Paul 9, 17 bridge-builder, bridge-building capacity of foundations 44, 168 Buck Trust 13 Building Equity Initiative 61 build-out, role of 42–43 built-in redundancy 179 Business Environmental Leadership Council (BELC) 94 Buttle Trust 37, 174, 177, 190 Calouste Gulbenkian Foundation, PRT 35, 40, 177, 190 Campaign for Freedom of Information (CFoI), Joseph Rowntree Charitable Trust, UK 128–134 Cariplo case on social housing 31, 167, 177, 178, 179, 196–197 Carnegie, Andrew 13 Carson, Emmett 4–5 case studies: Eberhard von Kuenheim Foundation, Germany, a new start for Theresienthal 152–163; Fondazione Cariplo, Italy, FHS and social housing 102–113; Joseph Rowntree Charitable Trust, UK, campaign for freedom of information 128–134; King Baudouin Foundation, Belgium, training of imams 76–89; Mozaik Foundation, Bosnia-Herzegovina, EkoMozaik 136–143; Pew Charitable Trusts, US, global warming and climate change program 91–100 ; Robert Wood Johnson Foundation, US, tobacco use program 115–126; Walton Family Foundation, US charter schools funding 59–73; William and Flora Hewlett Foundation, US, neighborhood improvement initiative 145–151

199

Casey Foundation Jobs Initiative 32 Cassa Depositi e Prestiti (CDP) 103 Cassa di Risparmio delle Provincie Lombarde 102 Center for Climate and Energy Solutions 92, 95–96 Center for Effective Philanthropy 21n6, 173 Center for Public Program Evaluation (CPPE) 122 Center for Research on Education Outcomes (CREDO) 64 Center Interfédéral pour l’égalité des Chances (CECLR) 79 Centers for Disease Control and Prevention (CDC) 119 Central European University 32 Charity Commission 133 Charles Stewart Mott Foundation 138 Charter School Initiative 66 civil society organizations 141 Claussen, Eileen 93–94, 97 climate change 7 commercialization 9 community change initiatives (CCI) 150 Community Foundation of Silicon Valley (CFSV) 147 Compagnia di San Paolo’s social microcredit program 32, 190 Complementarity, role of 42 complexity 33, 183; and dynamism 167 Conrad N. Hilton Foundation 119 constructive ambiguity 4, 5, 7, 28 corporate social responsibility (CSR) 136 cost avoidance strategy 5 cost-benefit analysis 161–162 Courtney, H. G. 185n1 Creative Philanthropy 174 creativity capacity 174 cross-sector collaborations 169 Crystal Bridges Museum of American Art 59 cultural heritage 167 customer satisfaction 9 Dahler-Larsen, P. 11 Davis, J. H. 172 Davos, World Economic Forum 141 Debenedetti, F. 106 defense and intelligence community 185n1 degrees of politicization 32 demonstrable benefit 29–30 Diana, Princess of Wales, Memorial Fund 8 DiMaggio, P. J. 3, 5 directly observed treatment system (DOTS) 39 diversity, attention to 179

200

Index

domestic violence 7 Donaldson, L. 172 drug and alcohol addiction 7 dynamism 33–34 Eberhard von Kuenheim Foundation, Germany, Theresienthal 6, 7, 31, 152, 190 ; ambiguity and benign fallibility 161–163 ; description 154 –156 ; design and implementation 157–159 ; foundation 152–153 ; governance and management 153 ; origins and rationale 156 –157; outcome and impact 159 –161; overview 152 ; role of 153 –154 education management organizations (EMOs) 71 education reform movement 59 EkoMozaik, Mozaik Foundation, BosniaHerzegovina 136, 136–143, 137 endowed foundations 29 Energy Foundation 92 entrepreneurial management 9 entrepreneurship capacity 174 Environment and Safety Information Act 1988 132 equal compensation principle 171 evaluators 184 exit strategy 84 ExxonMobil 98 Family Smoking Prevention and Tobacco Control Act 118 Federal Employment Agency 157 FHS and social housing, Fondazione Cariplo, Italy 102–113 financial independence 167 Fleishman, J. L. 18, 19, 27, 28, 30, 37 Fondazione Cariplo, Italy: FHS and social housing 102, 191; ambiguity and benign fallibility 111–113; description 104–105; design and implementation 106–110; foundation 102–104; grantmaking program (2000–2004) 106–107; housing funds, scaling up (2006–2009) 108–110; management and governance 103–104; origins and rationale 105–106; outcome and impact 110; overview 102; role of 104; social housing foundation (2004) 107–108 Fondazione Housing Sociale (FHS) 103–105 Fondo Investimenti per l’abitare (FIA) 109 food pantries 18 Ford, Henry 14 Ford Foundation 8, 14, 19

Foundation anstiftung & ertomis 31, 194 foundations 21n1; bridge-building capacity of 168; governance structure 12, 13; task environments and performance 33–34, 34; types and capacity requirements 175; potential and constraint 27; attribution, assessment criteria, and timing 30 –33; complexity and dynamism 33–35; digression 27–30; multiple goals, competing goals 35–37; politics 37–41; roles, advantages and disadvantages 42–46 Foundation Strategy Group (FSG) 60 freedom of Information Act (FOIA) 2–3, 6, 7, 31, 58, 129 free-market principles 64, 168 Freudenberg Foundation 31–32, 191 Fryhuset Easy Street initiative 32, 191 Gaberman, Barry 19–20 Galaskiewicz, J. 16 garbage can theory 36 General Education Development (GED) 148 GEO (Grantmakers for Effective Organizations) 10, 173 global warming and climate change program, Pew Charitable Trusts, US 91–100 Global Warming Petition Project 98 Global Warming Pollution Reduction Act of 2007 98 globalization 167 goal-activity alignments 19 goal displacement 3 goal-oriented project plans 35 governance structure 31 Grantcraft 10, 173 grantmaking strategy 66, 71–72, 106–107, 168 Greek National Opera 35 greenhouse gas emissions 6 Grønbjerg, K. A. 16 le Groupe d’Accompagnement 77 Hager, M. 16 Hammack, D. C. 46n1, 176 Hewlett, Flora Lamson & William Redington 145 Hewlett Foundation 67, 149, 176; caseoverarching questions 195 high dynamism 34 high-uncertainty environments 176 Hirschman, A. O. 185 Holley, Marc 66 humanitarian relief efforts 18

Index

incentive intensity principle 171 Indigo Trust 133 individualistic behaviors 172 informativeness principle 171 innovation-diffusion processes 175 Insufficiency 44–45 Integrated Funds System (SIF) 109 International Finance Corporation (IFC) 138 Islamic Cultural Center (ICC) 81 Islam in Belgium 6 James, A. 4 Jesuit Refugee Service 40 Jobs, Steve 8–9 John D. and Catherine T. MacArthur Foundation 93, 97 Joseph Rowntree Charitable Trust (JRCT), UK, Campaign for Freedom of Information 2–3, 128, 191; ambiguity and benign fallibility 132–134; description 129; design and implementation 130; foundation 128; management and governance 128–129; origins and rationale 129–130; outcome and impact 130 –132; overview 128 Joseph Rowntree Foundation 173 Kämpfer, Hartmut 155 Kao, J. 174 Kellogg Foundation 67 King Baudouin Foundation (KBF), Belgium, training of imams 2, 3, 6, 19, 31, 76, 84, 192; ambiguity and benign fallibility 86–88; case-overarching questions 195, 196; description 78; design and implementation 81–84; federal system 80 –81; foundation 76–77; goals 79–80; governance and management 77; imams, training 174; Muslim community, divisions within 81; Muslim education and integration 36; as neutral conveners and knowledge entrepreneurs 168; origins and rationale 78–79; outcome and impact 84–86; overview 76; political context 79; role 77; seize opportunities 179 Körber Foundation, DEU 175, 192 Kristallglasmanufaktur Theresienthal GmbH 155 Kuenheim Foundation 33, 34, 167 Kyoto Protocol 98 Lieberman, Joe 96 logical framework analysis 35

201

low dynamism 34 low-key coordination 40 low-performing firms 29 low-uncertainty environments 34 lsen, J. P. 36 management perspectives 174–177 March, J. G. 36 McCain-Lieberman Climate Stewardship Act 98 measurement movement 11–12 membership-based associations 12 Mexican American Community Service Agency (MACS) 148 Meyer, M. W. 28, 29 M-Fund 139 Migrant Rights Network (MRN) 36, 37 migration 7 monitoring intensity principle 171 Mott Foundation 140 Mowles, C. 185n1 Mozaik Community Development Foundation 136 Mozaik Foundation, Bosnia-Herzegovina: EkoMozaik 6, 136, 137, 174, 193, 196; ambiguity and benign fallibility 141–142; description 137; design and implementation 138; foundation 136–137; Mott Foundation 138–140; origins and rationale 137–138; outcome and impact 140 –141; overview 136 Muslims, integration into Belgian society 76 see also King Baudouin Foundation (KBF), Belgium, training of imams myth-creation 5, 7 National Alliance for Public Charter Schools 67 National Cancer Institute (NCI) 117, 119 National Education Policy Center (NEPC) 64 National Heritage Academies 61 National Library of Greece 35 National Tobacco Policy Initiative 118 neighborhood improvement initiative (NII), William and Flora Hewlett Foundation, US 145, 145–151 Nelson Mandela Foundation 39 neo-institutional theory 20 Nestle 129 Network Theresienthal 158 New Public Management (NPM) 9, 12 Nigerian Association of Development Agencies (NADA) 36–37 nomadic organizations 13 nonprofit organizations 2, 9, 21n2

202

Index

Open Society Fund 32 Fritt Ord Foundation 39 Ostrower, F. 10, 172, 173 Packard Foundation 67 particularism 45 paternalism 46 Pawson, R. 20 Peninsula Community Foundation (PCF) 147, 148 performance ambiguity 19, 34 permanent failure 28, 29 Peterson, Kyle 60 Pew Center on Global Climate Change (1998–2011) 93–94 Pew Charitable Trusts (PCT), US, global warming and climate change program 6, 91, 193; ambiguity and benign fallibility 97–99; case-overarching questions 195; description 92; design and implementation 92–96; foundation 91–92; origins and rationale 92; outcomes and impact 96–97; overview 91 philanthropic foundations 1 see also specific foundations; benign fallibility syndrome 1, 2, 12–17; demonstrable effectiveness 8–12; performance enigma 2–7; relevance and expectations 7–8; success and failure 17–21 Piano Nazionale per l’Edilizia Abitativa 109 politicking and strategizing 40 –41 Portuguese Immigrant Doctors’ Recognition Project 40 poverty alleviation 7 Powell, W. W. 3 Power, M. 11 Prendergast 172 Prewitt, K. 8 Primrose Hill Trust 133 principal-agency models 170 principal-agent constellation 16, 31, 171 principal-agent models 17 principal-agent-perspectives 170 –173 principal-agent problems 21n5, 86–87 principal-agent relationships 169 principal-agent scenarios 172 principles of good performance contracting 171 proactive management 178–185 professionalization 11, 29 pro-organizational behaviors 172 public budgets 8 Public Charter Start-Up Grant funds 61 public good 169 public–private partnership 39

quasi-governmental organizations 2 quasi-markets 173 Reeves, M. 177 Regione Lombardia 103 Regulatory Reform Network 92 Reichert, Joshua 92, 93 Rimel, Rebecca 94 risk absorber, role of 44 Roberts, J. 171 Robert Wood Johnson Foundation (RWJF), US, tobacco use program 2–6, 8, 31, 115, 117, 123, 173, 177, 178, 193; ambiguity and benign fallibility 122–125; caseoverarching questions 195; description 116–118; design and implementation 120–121; foundation 115; management and governance 116; origins and rationale 118–120; outcome and impact 121–122; overview 115; role 116 Rockefeller Foundation 8, 93 Rogers, E. M. 175 Rosenberg Foundation 8 routinized myth-building 3 salience 38, 38 San Francisco Foundation (TSFF) 13, 147, 148 satisficing 3, 5, 7, 11, 14–15, 21n4, 171 Schnurbein, Max Freiherr von 155 school reform see Walton Family Foundation (WFF), US, charter schools funding Schroeder, Steven 119 Seibel, W. 21n2 self-sacrifice 183 self-serving behavior 21n5, 172 sense-making 30, 171 signal amplification 173 Silicon Valley Community Foundation 4–5 Simon, Herbert A. 3, 21n4 social enterprise 29 social entrepreneurship 43–44 Social Housing Foundation (2004) 107–108, 110; scaling up 108–110 Societa’ di Gestione del Risparmio (SGR) 104 Somos Mayfair 148 Soros, George 32 Spence, M. 15 staffs: knowledge building 181; relationship building 182; work with complexity 182–183 Stavros Niarchos Foundation Cultural Center, Athens 35 Sternberg, Marc 60, 67– 68

Index

203

uncertainty, managing 178–179 unclear approach 37

Walmart Foundation 60 Walton Family Foundation (WFF), US, charter schools funding 8, 31, 33, 35, 175, 178, 194; ambiguity and benign fallibility 53–54, 70; case of Washington, DC 69–70; case-overarching questions 196; course adjustments 67; description 61; design and implementation 65–66; governance and management 60; grantmaking 71–72; investment criteria 62; K–12 Education Program 68, 71; origins and rationale 63–65; outcome and impact 67–69; overview 59; performance measures 66–67; principal-agent dilemmas 70–71; role of 60–61; strategic plan 2020 61–62; theory of change 72–73; Washington, DC 69–70; work in education 41 Waxman-Markey Bill 97 weak signals 169 Wessely, Dominik 160 William and Flora Hewlett Foundation, US, neighborhood improvement initiative: ambiguity and benign fallibility 149–150; description 145–146; design and implementation 147; foundation 145, 145; origins and rationale 146; outcome and impact 147–148; overview 145 Williams, Anthony 69 Winkler, M. 10, 172 Wooster, M. M. 28 World Health Organization (WHO) 125

Vello, Pier Mario 103 venture philanthropy 9

zero-sum thinking of agency theory 172 Zucker, L. G. 28, 29

stewardship model 173 stewardship theory 172 Stiftung Theresienthal 156 strategic philanthropy 9 substitution, role of 42 success and failure 30 –31, 166 see also potential and constraint success and failure continuum 28 Sun Oil Company 91 support and coordination 39–40 tax forgone 1 tax privileges 1 TB Free 39 Teach for America (TFA) 46 teenage smoking 7, 8 Theresienthal case, Eberhard von Kuenheim Foundation, Germany 152–163, 167 Thomas B. Fordham Institute 72 Tobacco Control ACT 118 tobacco use program, Robert Wood Johnson Foundation 115, 115–126, 117 Toepler, S. 5 Tomei, A. 10 Training of imams, King Baudouin Foundation, Belgium 7, 76, 76–89, 84 TRASI (Tools and Resources for Assessing Social Impact) 10