Foundations of the Future: Payout, Pools, Prizes, Proposals  

January 16, 2008

 

What will charitable foundations look like in the year 2020?  How can they shape and mold a nimble, problem-solving, change-oriented nonprofit sector?  A few ideas on my philanthropy wish list:

 

1) Spend Down!  Way Down!

Let’s change the IRS minimum payout rate from 5% to 20% and, just for fun, let’s not include administrative expenses in the payout calculations.  No single idea would do more to make foundations what they should be: ephemeral forces of good focused on marshalling big money, attacking big problems, and fostering scalable solutions.  A foundation with a 5 or 10 year lifespan would be infinitely more inclined to make change, rather than just make grants. 

 

2) Pool those Funds

In the U.S., government at all levels spends $1 billion on education every 192 minutes.  The next time a foundation tries to “move the needle” with a $500,000 educational grant, let’s remember that.  The only way to ever think about scalable impact is to move toward pooled resources among foundations.  Fat chance, right?  Well, it’s already happening today, and with good results.  Regional “funds of funds” like the Fund for Our Economic Future, which supports economic development in Northeast Ohio, and issue-based funds of funds like the National Fund for Workforce Solutions, bring dozens of national and local foundations around the same table to take on big challenges by aggregating resources.

 

3) Step Right Up and Win a Prize
Competitions and prize-based philanthropy have received their fair share of criticism, but nothing reinforces the notion that the best ideas are out in the community – and not in the confines of a foundation office – like gathering the most innovative approaches to the most vexing problems.  The Knight Foundation’s 21st Century Media Challenge, for example, has gotten an entire sector to think differently about community news in a wired (and wireless) world.

 

4) Stop the Arms Race

It’s a vicious overhead cycle.  Nonprofits hire more and more people to write more and more proposals in more and more proposal formats.  Foundations hire more and more people to read those proposals and bring on more and more people to evaluate and trumpet the outcomes.  Think of what would happen if more and more of this money were spent on actual programs instead.  I’m convinced that by 2020, we’ll finally have nailed down that elusive universal common proposal format, followed shortly thereafter by that universal common reporting form.  Wouldn’t it be nice for a 501(c)3 to write just one grant proposal at the beginning of the year, update it on some communal foundation website as needed, and simply point funders to it when applying for money?

And what if a given foundation doesn’t comply with wishes two, three, and four above?  Well, if I’m granted my first wish, we won’t have to worry.  It will cease to exist when its money runs out.

 

Please take a look at other recent Change Fan Blog posts:

 

01/23/08  A Stimulus Package That Could Really Change Things

01/23/08  Paying Teachers Sooner May Spark School Reform

01/10/08  Overcoming a Lousy Year for Closing the Digital Divide

01/04/08  If We Could Just Get People to Use the Revolving Door