Five Habits of Highly Effective Funders

Lowell recently started advising a Seattle-based technology entrepreneur who’s right at the beginning of his philanthropic journey. This new donor posed a question we wish all new donors would ask: “What do I need to do if I want to be effective at this?”

When the two of us huddled to chat about that great question, we realized we had a valuable and relevant resource to mine: the Leap Ambassadors Community’s profiles of positive-outlier donors. Although all of the profiles are different in terms of their issue interests, geography, and size, we see five common denominators we believe foundations should embrace:

1. Effective foundations have talented, empathetic leaders. The Performance Imperative calls “Courageous, adaptive executive and board leadership” its preeminent pillar. The same thing is true for foundations. The profiled foundations have leaders who aren’t just smart and strong but also empathetic. It’s probably not a coincidence that many of them came to their foundation roles after spending significant time on the grant-seeker side of the funding equation.

2. Effective foundations exemplify a “growth mindset.” These foundations have developed expertise in the issues they care about, but they also have the humility to recognize that they have a lot to learn from those working at the ground level, those whom they hope to benefit, and researchers testing hypotheses about what works. They see their opportunity to learn and improve as one of the most energizing parts of their privileged jobs—and are eager to share their learning with others. In the words of Carol Dweck, the Stanford psychologist who coined the term “growth mindset,” “Why waste time proving … how great you are, when you could be getting better? Why hide deficiencies instead of overcoming them?”

3. Effective foundations help grantees strengthen their organizations, not just programs. They typically provide grantees with flexible, multiyear funds, because these are the precious resources that enable grantees to strengthen the organizational muscles they need to deliver meaningful, measurable results over the long term. These funders are also likely to build staff capacity, and borrow consultant capacity, to help grantees strengthen their boards, develop their leadership talent, and build systems for continuous improvement.

4. Effective foundations cultivate strong relationships with grantees. Whether they use the term “partner” or not, they don’t see grantees as mere contractors. They see their grantees—and treat them—like professionals whose insights, expertise, and efforts are critically important for fulfilling the foundation’s own mission. “Trusting, supportive, honest relationships are what make it possible for us to be true partners to organizations that are working to become higher-performing organizations,” says Einhorn Family Charitable Trust Executive Director Jenn Hoos Rothberg. “And high performance is what makes it possible for them—and, by extension, us—to achieve more impact in the world toward our shared vision and goals.”

5. Effective foundations go to bat for their grantees with other funders. Nearly all foundations encourage their grantees to become more “sustainable,” but only the best roll up their sleeves to help their grantees line up additional resources from other public and private donors. In the words of Mulago Foundation CEO Kevin Starr, “We always felt that funders have a unique platform to reach out to other funders [on behalf of their grantees]. We came to see that we had an obligation to do it.”

There are plenty of other practices that these profiles have in common—from engaging in rigorous due diligence to soliciting diverse perspectives to ensuring reasonable reporting requirements. But the five core disciplines above are bigger than “best practices.” They’re fundamental building blocks for funders who aspire to truly be effective—to solve, not just salve, big problems. We thank the leaders of the profiled foundations for making these fundamentals clear to us. We promise, in turn, to share them widely with new and established donors alike.

Keep the faith (and reason),

Mario and Lowell

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Mario Morino is chairman of the Morino Institute, co-founder and founding chair of Venture Philanthropy Partners, and author of the lead essay in Leap of Reason. Lowell Weiss is president of Cascade Philanthropy Advisors, co-editor of Leap of Reason, and advisor to the Leap of Reason initiative.

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Updates From Around the Leap Community

Friends of the Children, which the Leap Ambassadors praised in the profile “Meaning, Purpose, and Joy,” just earned very favorable coverage in the New York Times column “Charity Finds Success in Work with At-Risk Children, But It’s Costly.” The article offers advice that’s very much in line with what we’ve spelled out above. It’s a must-read for any philanthropist passionate about solving a problem (in this case, improving the life prospects of the most disadvantaged kids) and willing to do whatever it takes to do so—even if that means making significant changes to your approach, subverting your ego, and working your tail off to engage other donors.

Truth be told, we’ve known for a long time that two of the most important infrastructure organizations for the social sector, Foundation Center and GuideStar, were merging. But now that the cat’s out of the bag, we can comment on it. In a word, hooray! Both of us have longtime relationships with both organizations, which are now united under the name Candid, so we’re in a good position to understand the merits of their respective strengths—and the courage it took to pull this off. Our hats are off to Foundation Center CEO Brad Smith and GuideStar CEO Jacob Harold, their boards, and their teams!

We applaud our friend and colleague David Bonbright for his givingCOMPASS column “Donors: Ask This, Not That.” Bonbright, the CEO of Keystone Accountability, advises donors to stop asking, “How is my donation making a difference?” and start asking a set of more sophisticated questions that “incentivize organizations to be authentic learners [and] iterative problem-solvers.” For example: How do you collect, analyze, and act on evidence? How are you working to build a culture of learning and “failing forward”? And how are your executive and board leaders demonstrating a commitment to high performance?

Could you use $100,000 in unrestricted funds? We thought so. The application window has just opened for the Drucker Prize, an award for nonprofits that exemplify the late, great management expert Peter Drucker‘s definition of innovation: “change that creates a new dimension of performance.” The window closes on April 30.

Could you use some good news out of Congress and the White House? We thought so. Thanks to tireless advocacy from Results for America and other nonprofits, the 115^th Congress passed and the President signed the bipartisan “Foundations of Evidence-Based Policy Act.” In the words of IBM Senior Fellow John Kamensky, “Hope springs eternal! [The] new law provides new opportunities to create a culture of evidence-based decision making in government.” If you’d like to help make sure the law lives up to its promise and gets implemented in ways that truly support learning and improvement rather than cookie-cutter, box-checking approaches, we encourage you reach out to Results for America and lend your voice.

In their Chronicle of Philanthropy opinion piece “How Nonprofits Can Tune In to What Nonprofits Need Most,” Ford Foundation executives Hilary Pennington and Kathy Reich show that they’re not afraid to call out bombastic donors who think they can solve big problems simply by “talking to peers in an echo chamber of ideas and theories.” Given that they’ve both served in senior roles in big foundations and in grant-seeking nonprofits, they know of what they speak. They offer a variety of common-sense ideas to help donors get on-the-ground wisdom from their grantees and intended beneficiaries.

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Events/Webinars for Raising Performance

Mar 7, 14, 19, 21 — Online
“Social Entrepreneurship Boot Camp” four-part e-certification series; SSIR, Center for Social Innovation at the Stanford Graduate School of Business

Mar 13 — Online
“Recruitment on a Mission: How Nonprofits Can Attract and Retain Today’s Talent” webinar; GuideStar

Mar 14 — Online
“General Operating Support: Making the Case to Grant Makers” webinar; Chronicle of Philanthropy

May 7-9 — Minneapolis-St. Paul
“Stronger Philanthropy” conference; Center for Effective Philanthropy

June 25-28 — Los Angeles
“Skid Row School for Large-Scale Social Change“; Billions Institute