The Future of Foundations
A Pivotal Decade
The full report, Foundation Horizon Scan: Taking the long view, can be found here.
Decisions we take in the next decade will shape our future for the rest of the century and perhaps beyond. We face transitions which are profound, interconnected and urgent. We have no more than a decade to prevent our descent into catastrophic climate change and species extinction. We are on the verge of a far-reaching shift in humanity’s relationship with technology, which will make the rise of the internet and the spread of mobile phones look like a tea party. Technology was once a tool at our disposal. Now it is becoming an intelligent, autonomous framework within which we live.
Both of these transitions will have a profound impact on organisations which may become more like digital platforms as jobs dissolve into tasks, forms of self-employment become the norm and careers become a loosely assembled series of projects. Working, poverty and insecurity will be ingrained. Inequality is likely to rise in part because the state’s constrained resources will be increasingly consumed by the health and social care needs of an ageing population, leaving little or no room for increased spending on young people and education, culture and arts. Young people are finding that cities deliver immiserating growth. Cities are where the good jobs are. Yet many people below the age of 40 cannot afford to own a home. As a result cities generate both affluence and anxiety.
Instead of dealing with these transitions, the UK government will be distracted by agreeing new trading arrangements as a result of a potentially shambolic Brexit. World power will shift towards China, as the US withdraws into bellicose isolationism and super-power rivalries intensify.
All of that seems likely to happen in the next critical decade. What should foundations and philanthropists do to improve the chances that these transitions go well rather than widening inequality, intensifying insecurity, fuelling frustration and provoking polarisation? Three broad strategies present themselves. None is straightforward.
The first will be to act as stabilisers in a period of extreme turbulence. Foundations with this mission will ‘keep-calm-and-carry-on’: while everyone else is losing their heads at least they can afford to keep theirs. Foundations should be able to make long-term commitments to people and organisations, communities and causes when everything else is being thrown up in the air. They may be among a precious group of organisations that are relatively immune to such disruption.
That stabilising role will be increasingly important as the state focuses on funding health and social care. Foundations will be increasingly asked to help charities to meet what we once might have thought were basic needs and common decencies: to help people who are in work put food on the table and send their children to school wearing clean clothes. The Paul Hamlyn Foundation, for example, is funding what it regards as ‘anchor organisations’ providing leadership and services on which an entire sector depends. Crisis and emergency is already a part of daily life for many charities and social organisations. Foundations will find it hard to stand by and watch them struggle or even go under.
It’s not just programmes and services that will need stabilising. If political systems continue to polarise and fragment, commitment to democracy weakens and authoritarian populism continues to prove a powerful disruptive force, then foundations will have to be prepared to stand up for basic values of justice, truth, knowledge, kindness, care which once we might have taken for granted.
Theories of change are all the rage. Yet perhaps in the decade to come we will also need a theory of stasis to tell us how to hold on to what we most value. Standing up for what might be regarded nostalgically as traditional, even old-fashioned values like truth and justice might come to be seen as a radical act of defiance.
That stabilisation role will be attractive to foundations which pride themselves on taking a long view of their role as custodians and stewards who do not like to be rushed into things. When everyone else is moving at breakneck speed, it may be no bad thing that foundations are prepared to be more considered. Yet this also runs the risk that they will fund an endless stream of sticking plasters, as foundations find themselves picking up the pieces of social and economic upheavals.
In an effort to avoid that fate, many foundations are already pursuing the second strategy, to modernise and professionalise. They are making their grant giving much more systematic and effective, to minimise waste and maximise impact. To do so these foundations will need to focus on a smaller range of strategic priorities which stem from a clear sense of purpose. They will look for grantees to provide better evidence of the impact they generate. Funding decisions will be taken more transparently, using impact measurement tools and evaluated more rigorously.
The most effective of these foundations will use digital platforms and tools to make grant giving much more responsive at lower cost. Many will start to invest more of their endowments in funds which pass more stringent tests of environmental, social and governmental responsibility. Advocates of this strategy will point out that while foundations should be having more impact on society they should not overreach themselves by claiming either the right or the ability to work miracles. Foundations assets are small compared to the much larger resources of government, and the flows of money going through private capital markets.
This modernisation strategy makes a lot of sense. The trouble is that it might just become a way for foundations to be more efficient at being ineffective. To put it another way: if all of us in the social impact and social innovation field are doing so much interesting, engaging work why is the world is still going down the drain?
Answering that question will lead foundations to consider doing more than just stabilising and improving failing systems; they will have to try to transform them to deliver better outcomes for more people without consuming more resources or producing more carbon.
There is a good case to be made that this should be the historic task of foundations in the pivotal decade ahead: rather than prop up failing systems they ought to be funding efforts to transform them. On the face of it, foundations should be uniquely positioned to promote just transitions: they have inclusive values, long-term time horizons and convening power. They are free from the constraints which limit the public and private sector’s capacity for transformational change. They do not have to deliver a constant flow of returns to hungry financial markets. Nor do their boards have to run for re-election every few years.
The trouble is that the transformer strategy will involve taking apart every aspect of the traditional model of philanthropy – even in its modernised, professionalised form. That model, simply put, is that foundations have an endowment of financial wealth which is invested in assets which earn an income. That income allows a foundation, usually acting on its own, to make charitable grants of limited duration to single charitable organisations to achieve specific, measurable outcomes for which the organisation can be held to account.
Transformers would have to move away decisively from this model. The investment incomes that foundations earn come from an economic system that generates the very problems they then seek to solve. The grants that foundations make are often ineffective in tackling the structural failings of these systems. A growing band of critics suggest foundations are a symptom of the problems we face not their solution.
What one might expect from foundations seeking transformative change is at least the following: a significant chunk of their endowment to be invested in social change not just the income earned from it; investments in long-term, collaborative efforts at systems change which would be animated by bold goals but lack the kind of specific output targets that foundations are used to; backing the kind of iconoclastic, prophets in the wilderness, like Greta Thunberg, who may not have a slide deck explaining their theory of change; and engagement with angry, unruly social movements which lack a clear organisational form.
Changing systems requires collaboration among many players from micro, peer-to-peer changes to consumer behaviour changes, through the meso level of reforming institutions, business models and adopting new technologies, up to the macro level of social norms, legislation and regulation. Systems only change when an entire field of players decides to switch to different rules of the game: entrepreneurs, incumbents, policy makers, politicians, activists, consumers and users.
That kind of change is never achieved by single-point solutions: investments of limited duration, in single organisations, to deliver a pre-specified outcome. It requires the mobilisation of transformative coalitions across society. Such coalitions may come together around a cause or perhaps around for a place. Foundations seeking to engage in this kind of change would not fund single charities but collaborative vehicles for social change: movements, coalitions, communities.
Philanthropists cannot do any of this on their own, even in their limited role as funders. They can, however, play a critical role in helping to gestate ideas; convene a field; fund intermediaries who can connect the micro to the meso and the macro; and help to scale promising solutions. Truly big change comes when very significant flows of public and private capital change direction because social norms about what is acceptable also change. That is where the big money is. Foundation grant making in the UK amounts to just £6.5bn, against current government spending of £780bn. Transformer foundations would have to see themselves as the dynamos within much larger processes of social change which they could not seek to control nor to take credit for.
Foundations are better placed at the moment to start this transformative work than either the public or the private sector. Foundations are no longer staffed just by grant givers. Many have executive leadership teams keen to engage in more creative, risky, transformational work in collaboration with others. Often these people, who are relatively young, have worked in civic organisations before going to work for a foundation. They know both sides of the story and they are ambitious to bring about significant change.
Boards of trustees are however are often uneasy about taking on controversial, collaborative work. A foundation that decided to put all its eggs in this transformation basket would have to turn its back on requests for urgent help from organisations dealing with people in dire need. They would have to put more of their endowment capital at risk. What family trustee wants to be held responsible for wiping out much of the value of a inherited fund for the sake of some risky transformational venture that fails?
Foundation leaders, trustees and executives alike, face a daunting task navigating the trades-offs between these strategies – stabilise, modernise, transform. But they have to engage with these strategic choices and find ways to reconcile them. How do you work to improve a deeply imperfect, dysfunctional system while also promoting a better alternative? How do you fund food banks. which serve tens of thousands of people every day, while also working to re-design the economic system so that it does not create that need? How do you fund legal charities working with migrants who face the threat of immediate deportation while also trying to shape a more just and humane society?
If foundations can find ways to collaborate more then perhaps they can also specialise more: some might be stabilisers knowing others will lead transformative work. Large foundations will have to be strange hybrids and oxymorons – radical traditionalists, stable transformers – as they attempt to conserve what is best about our current systems while simultaneously creating alternatives. Finding the right balance between these strategies is a difficult challenge.
As with all questions like this, the point of view one adopts counts for a great deal. If one looks at these questions from the perspective of the recent past, from where foundations have come from, you would say many foundations are moving in the right direction. They are better run; more strategic and more collaborative; investing more intelligently in pursuit of impact and increasingly prepared to put a least a part of their endowments into play as social investments to achieve better outcomes. All of that is worth doing.
However it looks different if one adopt the vantage point of the future and imagines looking back from 2030. By that date we will have had to take critical decisions to shape the direction of these pivotal transitions. My fear is that people will look back from that vantage point and wonder why we did not do more; why we busied ourselves improving broken systems when we needed to make much bigger, bolder, shared commitments to put all of the resources foundations have available to them towards changing the world for the better.
