The Disintermediation of the Federation Construct

disintermediationBy Richard Wexler

In its analysis of the “Trump phenomenon” last month, Time Magazine concluded, at least in part, that Trump was the logical end of the emergence of “disintermediation” in the political realm. This was the beginning of the end of the “middlemen” in political life as voters in the age of social media no longer need or trust them: the end of party bosses, mass marketing, even, possibly, political parties themselves. This grabbed my attention … and not in a good way.

The dictionary defines disintermediation as the:

  1. “… reduction in the use of intermediaries between producers and consumers, for example by investing directly in the securities market rather than through a bank.”

Were I a federation CEO/President or Campaign/FRD Director today, regardless of City-size, I would be deathly afraid of what disintermediation means or will mean or could mean for my community and for me. Perhaps the same question could have/should have been raised when CJF first began promoting designated giving in the early ’90s; or when JAFI’s IEF first “projectized” its budget in the mid-90s; or when the first federation demanded that its UJC Dues be recalculated subtracting designated gifts from its annual campaign statistics to achieve, in the case of the Boston CJP,  a reduction in its Dues support for JFNA; or when we all began “bowling alone” a decade and one-half ago; or, perhaps, you have a better date for the beginning of the disintermediation of the federation construct. I would suggest that it could have been at any of these moments which coincided with the breakdown of trust in the federation and the complicity of federations in that diminished trust. And, now the piper must be paid.

What does it mean to our communities, our organizations? It means that our donors more and more believe only in themselves; their message is that “we don’t need you to make charitable investment decisions on our behalf.” “We don’t need you to identify needs that need to be met, we can find the outlet for our charitable passion through Google.” The federation is more and more viewed as nothing more than the first “middleman” in a daisy chain of “middlemen” adding incremental costs in this process of disintermediation … costs that mount up and mount up. And, in desperate attempts in some communities to stay relevant and important, federations have often bought into the argument and, in so doing, have reinforced the breakdown in trust and the perception of no longer being necessary.

Recently, eJewishPhilanthropy published a thought piece authored by two former leaders of, first, CJF’s pioneering efforts in endowment and planned giving, Don Kent, and Joe Imberman, who, until last year had led JFNA’s PG and E programs with distinction before and through the merger until last year. The article, “Think Forward – the truth about Federations, donor advised funds, and supporting foundations (or ‘what is participatory philanthropy?’).” Here were two professionals charged with enhancing the role of federations for our donors who, instead, literally gloat about their role in promoting donor disintermediation as, what they (and, now, we) term “donor centered philanthropy.” It’s participatory philanthropy, alright – donors and beneficiaries “participate” and federations are but the conduit. And, the authors, once system-dedicated, decry a lack of “sufficient funding” of the endowment/planned giving effort. Nowhere do these two great professional leaders offer their comments on the reality that some Jewish communal endowment efforts (e.g., San Francisco) see donor funding flowing in excess of 75% to secular charities annually. In their roles as professional leaders of our Federation system, neither Kent nor Imberman felt the subject was worthy of  public discussion, dismissing the subject with continuing emphasis on the great growth of donor-advised funds, supporting foundations and more.

Worse, as Federations began to suffer reductions in, often the imminent collapse of, the unrestricted annual campaign, in too many places, they turned in apparent desperation to “gimmick campaigns” abandoning the centrality of federation in community planning and fund raising to total “donor choice,” “total choice” – “designation” by whatever name was chosen. Some even dropped Federation from their name (see, e.g., JewishColorado). The message was, at its core, “… trust us, send us your money and we’ll just send it on.” It made no difference to these communities, growing in number, that they had abandoned in largest measure the concept of collective responsibility that distinguished federation from all other Jewish charities. Worse, JFNA, designed to be the federations’ collective voice, was more and more led by those who failed to understand the core principles and historic values upon which community was built, even publicizing and promoting the least of communities as offering some form of what JFNA calls FEDovation which are, too often, nothing more than “anti-FEDovation.” The worst practices have become ingrained as “best practices.”

What can be done? First, a reenergized/reformed JFNA must rededicate itself to the founding principles of “federation qua federation.” This will require a professional staff inculcated with the spirit, passion and meaning of federation and the ability to communicate those values in word and deed. (How many in today’s JFNA Senior management have a significant federation experience in their backgrounds?)

Second, federation leaders around the Continent need to be inspired to a rededication to those values that built the system.

Third, planned giving and endowment professional leaders must assume responsibility for leading their donors toward greater support of the communal enterprise as one of their operating principles. It is not enough to increase the number of Supporting Foundations and DAFs, which the system has done with incredible success, without a concurrent and complimentary commitment to the work of the Jewish community in all of its aspects.

My sense is that it is probably too late for the system to be saved as such. Each federation will continue to bowl alone, collective responsibility will become more and more limited to emergencies and catastrophes except in those communities steeped in the historic values of federation. Some will argue that this “disintermediation” is fundamentally good for federations; giving donors greater control will help build trust in those places where trust has broken down. I would ask: show me one community where that has actually happened. Just one.

Richard Wexler is a Past Chair of the Jewish Federation of Metropolitan Chicago, the United Jewish Appeal and the United Israel Appeal and Co-Chaired the merger that created what is now JFNA. He is the author of the blog, “UJThee and Me.”