Strategy and Self-Deception

It should come as no surprise that, so far at least, no federation has demonstrated that a change in allocations process markedly improves fundraising results.

allocation processby Arthur Sandman

We are infatuated with Strategy. We are convinced that, if we operate our organizations strategically, the funders will flock to us and our enterprises will achieve impact – or perhaps that we will achieve impact because the funders will flock to us. And so, there is a rush to the strategic exit – to exit presumably inertia-mired processes of the non-strategic past to enter the paradisial Garden of Strategy. In the Jewish federation world, we see this trend manifested in at both the local and national levels in a quest for more “strategic” modes of allocation.

I somehow doubt that the jargon of the day had the founders of local federations in the early part of the last century speaking about the strategic advantages of federating their local fundraising as they were struggling to meet the demands of the European immigrations. Nor likely did the leaders of the American Jewish Joint Distribution Committee and the United (then) Palestine Appeal talk about strategy when they merged their fundraising efforts to create the United Jewish Appeal on the fraught eve of the Holocaust. And yet, how enormous their impact? Their response, whether driven by vision or desperation, created a powerful American Jewish community whose resources transformed Jewish history, saving, sustaining and changing lives.

They did not do it through “strategic allocations.” Nor through “impact grants.” Rather, they did it by building great institutions capable of performing great deeds. They did it by creating capacity and scale. They did it by focusing not on niche opportunities or even “big ideas,” but rather by focusing on the very destiny of the Jewish people. Sure, there were planners and social engineers – some giants in their fields – who buried themselves in the minutiae of how to migrate a refugee from one continent to another or teach a skill or a language or a tradition. But the donors? They gave to rescue Jews in need, to build a State of Israel, to deliver a heritage to a next generation. They gave to a cause – a great and noble cause.

Much ink has been spilt on the question of where the great causes have gone or what is or should be the great cause of our day. And forests of paper speculate and investigate as to how the philanthropic marketplace – and with it, the Jewish philanthropic marketplace – has changed. But the analysis has led to one conclusion. We need to become strategic if we are to survive.

The paradox is that the old paradigm was stunningly strategic. Not only did it tackle momentous challenges, but it created for the federations a unique position in the philanthropic marketplace. In a competitive environment, strategy is all about defining one’s distinct value-add. The federation movement’s strategic position is built on its scale – both its own financial capacity and the additional philanthropic, governmental, and consumer capital of its partner institutions. Federations distinguished themselves from the private foundation world precisely by leveraging the scale of their local and international service network to respond systemically and, frankly, historically.

And so, today, as federations gravitate toward presumably more strategic funding processes in the quest for greater impact, they are, in fact atomizing. At the very moment that they have largely, for the first time in nearly a century, created a national branding for the federation movement, the fund distribution patterns are assuming the persona of the foundation world. The emphasis is shifting to addressing scalable issues – where discrete sums of money can achieve visible impact – rather than preserving the scale that was the movement’s hallmark.

The argument is that the donors will appreciate the tangible results of their donations, because, ironically, the very smallness of the intervention allows for it to be perceived with our senses. We have no sense of impact in discussing the achievement of bringing nearly 20,000 immigrants a year to Israel, because 20,000 seems so insignificant compared to a population of millions and yet far too large to see. But we achieve an enormous sense of impact if we can visit an empowerment program operated by a small nonprofit for 150 Ethiopian olim because, we can say with certitude, “our directed grant to this specific project is achieving X, Y, and Z.”

In fact, there are good reasons for a federation to direct a portion of its funds to specific projects. Such grant-making does provide a more easily-communicated sense of achievement and satisfaction to donors. It impels partner institutions to challenge their assumptions and innovate. And for many years, many federations have achieved both scale and intimacy by continuing large-scale unrestricted allocation programs even as they introduced smaller grant programs.

In my own experience at UJA-Federation of New York – where I was involved with two allocation process redesigns – and at United Jewish Communities of MetroWest (now the Jewish Federation of Greater MetroWest) – where I gave professional leadership to two more redesigns – targeted grants were used to positive effect in the context of an overriding commitment to the partner institutions through far-larger unrestricted allocations. In fact, New York was making targeted grants long before I began my career in the early 1980’s; the idea is hardly new.

But, today, the situation seems to be changing. Some communities are redefining their entire allocations processes – both locally and overseas – to what-are-described-as strategic allocation processes. Funds are more specifically directed. Reporting and monitoring requirements are upgraded, precisely at a point in time that federations appear to be shedding staff in the face of budget constraints – and particularly in the planning and allocations arenas. Traditional beneficiaries of the federated system devote increasing resources to satisfying the reporting requirements. And even in communities that limit their agencies’ prerogatives to fundraise independently, agencies must adopt a fundraising posture – with its attendant costs – simply to secure the federation’s funding.

It should come as no surprise that, so far at least, no federation has demonstrated that a change in allocations process markedly improves fundraising results. The very argument that federations use to explain their new approach to funding is the very argument that individual donors use to explain their preference to support smaller, more directed nonprofits. Federations are unwittingly reinforcing the very trend in philanthropy that presents the greatest threat to their own strategic position.

All in the name of strategy. I fear that our strategies are, perhaps, not strategic at all.

Arthur Sandman is Executive Vice President of Jewish Agency International Development, and previously served in planning and allocations positions at The Jewish Federation of Greater MetroWest and UJA-Federation of New York.

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Comments

  1. says

    Yes, strategic appropriations are designed, in part, to engage a younger generation of donors who, undeniably, gravitate to causes where measurable outcomes result from specific and strategic philanthropic investment. But strategic appropriation is also an essential tool where the pool of available dollars is shrinking (as it is for many Federations) and community need has shifted, or is ever greater. How do we choose where to direct our support? Strategy has to trump legacy or we fail to remain relevant.

  2. says

    Maybe we are giving the wrong message. Maybe we are following the donor as opposed to being leaders and teaching the donor the importance of the entire community and its availability of services. Maybe we have to work to not follow what is going on in the accepted literature and choose to think about changing that paradigm for thinking since it is the latter mode that we need for the future not short term fixes. If our agencies cannot count on the federations for support of basic services and we turn ourselves into foundations where agencies have to cleverly come up with a fundable program, we are doing an incredible disservice to our community. So, I think the current method isn’t good for donors nor for agencies so why allow ourselves to follow such a flawed path.

  3. says

    I applaud the author for this article. Our Federation spent a great deal of time studying allocations methods this year only to come to the conclusion that while all of them would impose more burdens upon both the Federation and the agencies, none would likely increase giving.

    We concluded our resources would be better spent on re-educating community members about why it is good and important to give than changing the way we disburse the monies.

    Each generation will have different preferences for how they give, but the reasons for supporting Jewish life should be eternal. We need to focus on the reasons, not the current preferred means.

  4. James Gurland says

    First and foremost, let my commend Arthur for saying what needs to be said, coming from his perspective. I have known Arthur for many years being a Board Member of the Jewish Federation of Greater MetroWest for some time. I also can understand the context even better as the incoming President of a beneficiary agency (Daughters of Israel Geriatric Center). We are but one of hundreds of thousands of local beneficiary agencies who are struggling to survive at a time when Federation allocations are decreasing in actual amounts and as a percentage of our revenue pie. Henceforth the reason in my opinion, why perhaps our boards may be supporting less and less as we have to shift focus to our what we deem as more compelling priorities such as the agencies we must lead and serve. I am not stating this as criticism, but rather as cold harsh reality. Not only as a lay leader but as a member of a peer group (I am 48 years of age), that is becoming more and more detached from the Federation world and as a Professional Fund Raiser who spent 14 years in the Jewish world and is now in higher ed. Folks…wake up…it is about what I refer to as COMPELLING RELEVANCE. The more diffuse your message is and the less compellingly relevant…well the numbers will speak for themselves. I am not advocating the end of the Federation system…rather, I am as one who owes his life to Federation (I was the beneficiary of an Otzma Fellowship in 1987 that changed my life), but rather from the top down a reinventing for more focused, less centralized allocations and looking at Federation in the Foundation model…

  5. says

    Arthur,

    You make a great point about the need for federations in particular to think big, and act big. Typically the largest Jewish fundraising organizations in their communities, no other organization can lay claim to investing on behalf of the community (even as the percentage of that community that actually supports federations steadily declines).

    But I think you miss the goal of why a federation would redesign its allocations process. As a former federation planner, even I was less than energized by the annual sausage-making that transforms communal investment into meaningful outcomes, and a ultimately a thriving, vibrant, engaged community.

    Rather, the process is about making sure federations are still making those big splashes. A hundred years ago, who had the information, the knowledge we possess today? Maybe impact was easier to measure, because the challenges were existential (in 1930s Europe, in Soviet Russia). But now our capacity to make transformative change is so much greater! We can argue about whether federations are actually meeting that higher bar, but I think we should set reasonable expectations for where the allocations process fits within that structure.

  6. says

    It seems to me that everyone is missing a real reason for “Directed-Giving”. I believe that by offering a choice to donors of where their individual annual gifts will go in their specific community, it gives the donor a sense of belonging to the allocations process and to the actual philanthropic organizations that they help to fund. This Federation started a “Directed-Giving” program to community impact areas last year. I can not say that it has increased the amount of money we have raised each of the past two years, but I can say that the donors who have taken part in this exercise, continued it for the second year and it was easier to “sell” them on a gift this year. It is getting harder and harder to convince people that this is the place where your money will get the best “bang-for-the-buck”, so the “Directed-Giving” to me is another way to hold onto those precious donors interests.

  7. Stu Abraham says

    “It should come as no surprise that, so far at least, no federation has demonstrated that a change in allocations process markedly improves fundraising results.”
    Perhaps if Arthur were to look at what the more engaging and engaged federations are doing, he would conclude on his own that his statement is out of touch with the times. I can’t help but notice that advocating for maintaining our “old paradigm” would certainly seem to serve JAFI best. And it fails to consider that JAFI itself has changed the paradigm in terms of how it raises funds. JAFI is now approaching federations directly for funds in addition to the JFNA funding it has traditionally received.

    Our federation has undergone a strategy-led transformation that has us focusing on community impact and executing our role in setting priorities based on a communal perspective. While our efforts are nascent, the results are already obvious. We have more donors, an improving campaign, and a far more visible presence and greater understanding of Federation in our community.

    To quote that well known sage Yogi Berra “If you don’t know where you are going, you’ll end up someplace else.”