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.