Federations in the 21st century will be as much about meaning as money, as concerned with results as much as with resources, and be held to higher standards of both efficiency and effectiveness similar to what they have imposed on their beneficiary agencies.

By Chip Edelsberg, Ph.D.

[The following piece is an abridged version of an article I wrote nearly ten years ago for the Journal of Jewish Communal Service.  At the time, I was Vice President of the Jewish Community Federation of Cleveland.

Amid the current rancorous conversation about federations, I recalled this article.  I submit it here to eJP in an effort to advance conversation about substantive matters of organizational performance.  My interest is to offer actionable items intended to assist federations (and foundations) to improve their philanthropic effectiveness.

This article obviously does not address directly criticisms of federations as ineffectual workplaces – a perspective I do not share, at least when indiscriminately applied wholesale to all federations. But it does suggest the following, namely, that truly transparent social sector organizations actively accountable to their stakeholders are compelled to create professionally supportive, organizationally healthy work environments as a sine qua non for achieving organizational mission and strategic priorities.]

Jewish community federations enjoy an unparalleled 100-year history as trusted depositories for annual contributions of philanthropic resources. Yet, a century of success in annual campaign transactional fundraising cannot obviate the need for intensive efforts to develop much more highly participative forms of philanthropy. Similarly, just as campaign achievements are a necessary but insufficient means of raising funds to meet the system’s needs, the Jewish federation’s hard-earned reputation as a safe, trustworthy Jewish community chest is now inadequate to satisfy growing expectations of increasing numbers of contemporary donors (Edelsberg, 2004). Indeed, grantees themselves are asking to be held to higher standards because of the sector-wide realization that “no cause is worthy enough to justify a gift that is not making a truly positive difference in the lives for whom it is intended (Streeter, 2001, p. 11).” Furthermore, it costs money both to develop federation resources, as well as to give them away (Litman & Karen, 2005; Siegal & Yancey, 2003).

Federations raise funds and build community. They also engage in grant making – as much as $3 billion of it, system wide, in any given year. The challenge to federations is this: Today’s donors demand accountability, seek value, and expect performance. In other words, federations need to become philanthropically effective organizations.

Effective philanthropy is an approach to raising, stewarding, and granting funds that relies on transparency and accountability plus the measured advancement of mission to achieve its purpose. Effective philanthropy for federations is grounded in partnerships with beneficiary agencies, a key component of which is the measurement of outcomes achieved with funds granted to projects deemed to hold the greatest promise for producing communal benefit. Federations are best served when they balance their relentless pursuit of resources with resolute efforts to demonstrate results.

FUNDER, AND GRANTEE PRESSURES FOR PHILANTHROPIC EFFECTIVENESS

Peter Frumkin (2004) of the Hudson Institute argues that foundation philanthropy is “quietly in the midst of a crisis” (p. 3). Frumkin writes, “At the core of the angst gripping funds are two complex and enduring issues that have confronted foundations of all kinds: effectiveness and accountability (p. 6).” As he points out, no one would suggest, given the choice between effectiveness and ineffectiveness, that foundations would voluntarily choose the latter. Federations, Mark Kramer observed in a recent conversation, “will not lose points by demonstrating effectiveness.” However, there is more than a straw man argument to make here. Federations need to acknowledge the strong and mounting donor sentiment that accounting for effective use of donated dollars is critical to its mission. Younger funders are particularly vocal about matters of effectiveness and impact. They often define themselves as “investors” and are every bit as interested in hard data on grant outcomes and results as they are in stories of grantee success (Grace & Wendroff, 2001).

Federations would do well to recognize that the system’s prevailing fundraising mission, ethos, and culture create a standard of money metrics that fails to satisfy and motivate contemporary funders. Such measures as numbers of new and lapsed campaign donors, size of individual gifts, card-for-card percentage increases in giving, and total dollars raised in and of themselves do not inspire donor trust or engagement.

ASKING THE RIGHT QUESTIONS

Federations can begin assessing their philanthropic effectiveness by asking three deceptively simple questions: What are our critical goals? How are we doing? What have we accomplished? Federations will need to hold themselves to the same standards to which they expect grantees – especially agencies that receive annual campaign allocations – to conform. They will need first to create and to cultivate a culture of measurement in which funds raised are complementary to the work of describing and determining what goals have been achieved in the investment, management, and use of funds. In this scenario, federations would immerse themselves in more purposeful monitoring of funds allocated from the annual campaign and granted from endowment funds and supporting organizations. This calls for studying significant allocations and grants to see whether grantees achieved the stated project outcomes. On a broader level, federations would systematically examine their philanthropic effectiveness, beginning with a more penetrating substantiation of the basis on which community funding priorities are determined. They would conduct a thorough, open, and well-communicated annual review of their overall performance in the raising of funds, stewardship of resources, and results realized in the funding of grantees.

The Partnership for Excellence in Jewish Education, Birthright Israel, and the Jewish Health Care Foundation of Pittsburgh (Prager, 19994) are among the major Jewish communal enterprises in which principles of effectiveness pervade grant making. Although approaches to describing and documenting philanthropic effectiveness are distinct (Ostrower, 2004), each of these funding organizations seems to accept the Porter and Kramer proposition that essential elements of effectiveness include the following:

• clarity of organizational purpose and mission focus
• articulated theories of change for individual projects
• fiscal accountability
• efficient operations
• organizational transparency
• grant monitoring
• outcome assessment of grants
• knowledge assessment (what is learned in the grant making by funder and grantee alike)

THREE INITIAL STEPS IN DEMONSTRATING PHILANTHROPIC EFFECTIVENESS

This business of effective philanthropy cuts across three levels of federation activity: evaluating individual grants, describing more explicitly how it decides to grant funds, and working closely with grantees to build value through results-oriented philanthropy.

The first and most easily accessible realm is the monitoring and evaluation of its individual grants. Grant making is a major function at every federation in the country (even if it occurs entirely in the form of campaign allocations). In the independent sector, project and program evaluation is generally considered to be a given in most grant making of any meaningful amount (Walker & Grossman, 19995). There is no evidence, however, that evaluation has a firm foothold as a common practice in the federation system. In addition, although it is obvious, for example, that a social services project, a social action initiative, a curriculum innovation in a day school, or a capital project each requires different approaches to evaluation, each also necessitates the expenditure of funds and the application of professional expertise if its success is to be measured.

Federations as a rule neither budget significant dollars nor routinely hire trained personnel to conduct grant evaluations (Litman & Barth, 2005), although there are notable exceptions. Additionally, models already exist in the system in which philanthropic effectiveness is displayed through rigorous grant evaluation. The challenge is to make this practice a standard one.

What we are seeing in the field is a pronounced shift from intention-based charity to investment-based philanthropy. Funders, particularly next generation and entrepreneurial philanthropists, clamor for a focus on performance. They expect the federation to work with grantees to determine whether funded projects produce outcomes and results.

To measure their philanthropic effectiveness, federations need to describe more explicitly how they reach decisions to allocate and grant funds and on what basis they make awards. Federations then should account for the ways in which grantees achieve desired outcomes, as well as analyze situations in which unrealized or unanticipated goals characterize the funded project.

Federations are well positioned to measure their philanthropic effectiveness. Around the country, they enjoy excellent relationships with donors and grantees alike. Volunteer leaders, working together with trained professionals, can ensure that dollars raised in annual campaigns and funds contributed to donor-advised vehicles and supporting organizations are managed with full and open disclosure. Investment tactics, strategies, and performance should be reported broadly and available for public scrutiny. Granting funds from the campaign, philanthropic and federation endowment funds, and supporting organizations creates opportunities for funder and grantee interaction that will advance the dynamics of effective philanthropy. At each point in these interactions there is the opportunity to deepen donors’ involvement with the federation and to enliven the spirit of mutual responsibility the federation and its grantees have to one another for the stewardship and effective use of funds.

A NEW COVENANT

Jewish community federations are among the most successful fundraising organizations in the entire not-for-profit world. However, the amount of dollars raised and the metrics of money alone will not sustain the system. Federations in the 21st century will be as much about meaning as money, as concerned with results as much as with resources, and be held to higher standards of both efficiency and effectiveness similar to what they have imposed on their beneficiary agencies. The stakes are high, as Cleveland Federation president Tim Wuliger (2004) notes: “Successful organizations which do not seek to change or worse yet, have erected impediments to change, are the successful organizations which have begun to fail.” We have a new covenant to create. Funders are asking the federation to develop an architecture of tzedakah that produces blueprints for the transparent management of bountiful philanthropy. Contributors who entrust federations with their donations and philanthropic assets expect that the federation will make a demonstrable difference in the world with their grants. The federation faces an extraordinary opportunity to strengthen abiding bonds with loyal donors and to enter into authentic relationships with all funders through a sacred commitment to philanthropic effectiveness.

Chip Edelsberg, Ph.D., is Executive Director of the Jim Joseph Foundation, which fosters compelling and effective Jewish learning experiences for young Jews in the United States. When the full version of this piece was originally published in the Journal of Jewish Community Service, Edelsberg was Vice President of the Jewish Community Federation of Cleveland.

References

Edelsberg, Charles. (2004, Winter). Federation philanthropy for the future. Journal of Jewish Communal Service, 31-38.

Frumkin, Peter. (2004). Trouble in foundation land: Looking back, looking ahead. Indianapolis: Hudson Institute.

Grace, Kay Sprinkel, and Wendroff, Alan L. (2001). High-impact philanthropy: How donors, hoards, and nonprofit organizations can transform communities. New York: John Wiley and Sons.

Litman, Sacha, and Barth, Karen. (2005, February). Federation planned giving and endowments economics study. New York: United Jewish Communities.

Ostrower, Francie. (2004). Foundation effectiveness: Definitions and challenges. Washington, DC: Urban Institute Center on Nonprofits and Philanthropy.

Prager, Dennis J. (1999, November). Raising the value of philanthropy. Pittsburgh: Jewish Healthcare Foundation.

Siegal, Dan, & Yancey, Jenny. (2003). Philanthropy’s forgotten resource? Engaging the individual donor. Mill Valley, CA: New Visions Philanthropic Research & Development.

Streeter, Ryan. (2001). Transforming charity: Toward a results-oriented social sector. Indianapolis: Hudson Institute.

Walker, Gary, and Grossman, Jean Baldwin. (1999, April). Philanthropy and outcomes: Dilemmas in the quest for accountability. Public/Private Ventures Brief.

Wuliger, Timothy F. (2004, December 5). Board Chair’s remarks. Annual Meeting of the Jewish Community Federation of Cleveland.