Are foundations equipped to help nonprofits survive the pandemic?
With close to 100,000 active foundations and collective annual giving of nearly $87 billion, America has the largest philanthropic sector in the world. While that pales in comparison to the trillions of dollars the federal government and Federal Reserve are pumping into the economy, it can be a lifeline to nonprofits, many of which have precious little cash to burn and are caught in the crossfire of overwhelming demand and an existential struggle for their own survival. So, one answer to the question “are foundations equipped to help nonprofits” is a resounding “yes.”
Foundations have a lot of what nonprofits need most right now, namely money. Candid research tells us that, even when faced with volatile markets, foundations, on the whole, step up during recessions and go beyond their required minimum payout rate of 5 percent. Indeed, in response to the COVID-19 pandemic, foundations have been quick to throw out a lifeline. A tracking site created by Candid has already logged $6.7 billion in foundation grants globally and a rapidly growing list of coronavirus relief funds and requests for proposals.
The current public health emergency also is showing us that philanthropy—an impossibly diverse field of individualized private institutions—can learn from the past. More than a few foundations have notified nonprofits that their current grants, many of which were heavily conditioned by expected outcomes, budget restrictions, and theories of change, can be converted to general operating support. That page in the playbook was developed in the weeks following the 2004 South Asian tsunami, which immediately transformed small coastal nonprofits into first responders. At the time, a handful of foundations experimented by turning existing grants for sustainable fishing projects, ecotourism, and small business development into cash that could be used however the grantees saw fit. Those kinds of best practices have been codified by the excellent Center for Disaster Philanthropy and are available for all donors to adapt to their own purposes.
But while many foundations have learned to move money swiftly in times of need, many still are hampered by a critical talent gap when it comes to helping their nonprofit partners survive a crisis like the spread of Sars-CoV-2. In larger staffed foundations, the recommendations on how to spend grant budgets almost always originate with program officers. Recruited for their expertise in a given field, foundation program officers typically have training in the social sciences, business, or law. Some are of a more scholarly bent, others are activists at heart, but most have one thing in common: they have never actually had the experience of running a nonprofit organization.
I speak from my own experience, which includes several decades working in foundations. Everyone in those foundations was exceedingly smart, articulate, and had seen enough good and bad projects and organizations to give them valuable knowledge of the nonprofit world. But much like that possessed by consultants, our knowledge was more theoretical and our interventions more short-term and episodic. I remember a day at the Ford Foundation when I turned to one of my mentors and asked, “What do any of us really know about running an organization?” Our actual lived organizational experience was limited to that of an institution in which the amount of money available to spend might fluctuate a bit from year to year but in the end was always there, thanks to the endowment.
That all changed the day I started as president of Foundation Center, now Candid. It was October 1, 2008, just two weeks after Lehman Brothers collapsed and the bottom fell out of the global economy. Immediately, I was faced with the real-life challenges of meeting payroll, covering rent, selling products and services to a panicked customer base, and raising money in the most unfavorable climate imaginable. More than a decade later, I again find myself staring down a perfect storm—although this time it’s a pandemic and a recession combined. Truth be told, in the 11-plus years since 2008 the pressure has never really let up. Balancing income and expenses is a juggling act that goes down to the wire every year, before starting all over again on January 1. And all that juggling is in service to a mission—even more so in an existential crisis like our present one. Running a nonprofit is an intensely real-time proposition; working as a program officer was not.
Groups like Grantmakers for Effective Organizations and the Center for Effective Philanthropy have studied how professionals with nonprofit experience make better program officers. There are some with that kind of background, but I would like to see more, particularly individuals who have been nonprofit executives. After years of laboring in the fundraising mines, many would jump at the opportunity to work in an endowed institution and be able to contribute to the development of effective, experienced-based strategies designed to help grantees survive a crisis. In the same way that foundations have learned to convert their restricted grants into general operating support in times of need, I hope that on the other side of this crisis foundations will enrich their in-house talent with nonprofit leaders who can help them better prepare for the next crisis.
One thing is sure. Shocks, whether natural disasters, pandemics, deep recessions, or any combination thereof, will continue to occur. And so long as foundations are ready with financial resources, best practices, and talent, the social sector will survive and thrive.
Editor’s note: for more information on philanthropy’s response to the pandemic, visit Candid’s coronavirus pop-up webpage.