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Money Well Spent: A Strategic Plan for Smart Philanthropy

Any donor setting up a foundation must ask himself or herself several questions. What do I want to do with my money? What are my goals? How long do I want to stay in business?

There are, of course, all sorts of books, manuals, and philanthropic advisors ready to offer their services to the donor who wants to learn more about how to be a good philanthropist. What makes Money Well Spent distinctive is that Brest, president of the Hewlett Foundation, and Harvey, president of the ClimateWorks Foundation, aren’t trying to offer moral or spiritual advice, or a guide to how to comply with IRS regulations. Rather, their purpose is to encourage donors to think carefully about why they’re giving and to nudge donors and program officers to do a better job with their grantmaking. The result is a book that is a sort of management guide for foundation executives. Money Well Spent is, for the most part, a book that any donor would find useful and interesting.

“Effective grantmaking,” the authors write, “requires strategies based on clear goals, diligent care in selecting which organizations to fund, and provision for assessing the results—good or bad. Whether you are giving away $100,000 or $1 million a year, your funds are not unlimited, and a good strategy can multiply their impact many times over” (xiii).

Brest and Harvey are men of the left, the sort of people who like dividing the philanthropic community into foundations and “conservative foundations,” which they regard as somewhat alien and distasteful. But they recognize that right-wing foundations have offered many valuable lessons for the entire philanthropic community, particularly in the importance of providing major grants strategically to a few organizations for a long period rather than the far more common (and ineffectual) practice of many small, short-term grants to a large number of organizations.

They note that the rise of the law and economics movement in law schools is due in part to the ability of program officers at the Olin and Scaife foundations to find a few scholars they trusted and then give them decades of support to ensure that law-and- economics became an established school of thought. They quote historian Stephen Teles, who notes that part of the reason why funding for law and economics became successful is because donors were interested in supporting serious scholarship rather than funding issue briefs with a very short shelf life. Patrons of law and economics professors, Teles writes, “were willing to accept fairly diffuse, hard-to-measure goals with long-term payoffs when they had faith in the new individuals behind the projects” (236).

Brest and Harvey also accept the insight of the great political philosopher Edmund Burke that society is hard to change and that “heroic efforts to improve matters can have disastrous, unanticipated consequences” (278).

“Strategic philanthropy,” they write, “is about improving the world, but it is not about heroic efforts” (278).

The authors also commendably avoid jargon as much as possible. You won’t find any discussion of “capacity-building” in this book. The authors prefer “organizational effectiveness.” “It is easy to lapse into jargon that obscures rather than clarifies or just seems mysterious or silly to outsiders,” they write (95). They also recommend the fine articles of Tony Proscio, who has done a great deal of good in getting philanthropists to abandon pseudo-scientific jargon.

Brest and Harvey’s method is to present donors with options without necessarily arguing for a particular side. Take, for example, the thorny issue of perpetuity. The issue of whether or not foundations should have term limits doesn’t split along traditional left-right axes; both the liberal National Committee for Responsive Philanthropy and the conservative Capital Research Center, for example, would be happy if foundations would substantially increase their annual payout rate beyond the current legal mandate of five percent of assets. The two organizations approach the issue from different angles—the NCRP would want foundations to give more money to nonprofits as a way of increasing those nonprofits’ resources and ability to foment social change, while the CRC would favor increased payouts as a way of diminishing the power of liberal foundations with perpetual charters. Even though both groups see the nonprofit world through very different lenses, they would nonetheless agree that the payout rate has to rise.

Rather than take up the substance of such philosophical arguments, Brest and Harvey seek to explore their pragmatic implications in the context of the donor’s own goals. They fairly present the arguments for and against perpetuity and provide examples of how these principles are actually applied. If you’re concerned about the environment, for example, you might agree with donor Richard Goldman, who is annually spending ten percent of the Richard and Rhoda Goldman Fund’s assets to fight climate change because “for the environment and other charitable causes, the ‘rainy day’ is upon us” (261). They also note the Whitaker Foundation, which supported biomechanical engineering and decided to spend down in fifteen years. By the time the foundation closed in 2006, the Whitaker Foundation had invested $800 million in medical schools and its wealth had helped fuel the growth of 80 biomechanical engineering programs in American universities.

On the other hand, you might think that not spending money now can ensure that your principles can be preserved into the future. Brest and Harvey suggest that donors think carefully about whether or not principles can be preserved in practice. They cite Randolph Foundation President Heather Higgins, who has observed that a foundation dedicated “to preserving the principles of the United States” could very well fulfill its mission by supporting immigration in one generation and opposing it in another (265).

Brest and Harvey are enthusiastic supporters of evaluating grants, and offer many cogent reasons why evaluation is a good idea. They note the research of criminologist Joan McCord, whose best-known achievement was to show that programs designed to help troubled boys avoid delinquency through summer camps, health programs, and mentoring programs actually ended up increasing the likelihood that teenagers would become criminals, alcoholics, and unemployed. (McCord hypothesized that this was because the teens thought they were in the special programs because they thought something was wrong with them, and ended up turning bad as a result.)

Evaluation, if done correctly, can also be a powerful tool in showing the success of worthy programs. For example, they summarize a 2004-05 study by SRI International of the KIPP charter schools in the San Francisco Bay Area. The SRI researchers proved that there was strong evidence that students in the KIPP schools—with long school days and principals fully in command of their schools—did better on state tests than did students in comparable public schools.

The authors persuasively show that, much of the time, evaluation is a good idea. But their case would have been stronger if they realized that an emphasis on evaluation often distorts results to what can be measured. Suppose you are running a Christian charity dedicated to winning souls for Christ, and that you do this by fighting poverty by providing food, shelter, and lessons about Jesus’s teachings. An evaluator could count the number of bed-nights provided or meals served. But how could a technical evaluation determine how many poor people benefited from receiving loving care, or even accepted Jesus into their lives? Again, evaluation is a very good tool, but not a perfect one—and Brest and Harvey’s case would be stronger if they attended to the many worthy philanthropic goals that can’t be formally evaluated.

Money Well Spent is a useful addition to the literature of philanthropy. Brest and Harvey do a good job in helping donors and program officers frame the questions they need to answer if they are to ensure that their grants will help fulfill their foundation’s mission.

Martin Morse Wooster is a senior fellow at the Capital Research Center and a contributing editor to Philanthropy.

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