We should not forget that in addition to the financial support, the brand credibility of ongoing foundation support is often helpful in obtaining or maintaining other donors.
by Jeffrey Solomon
In this latest in a continuing series of blogs about spending down – as manifested at the Andrea and Charles Bronfman Philanthropies (ACBP) – I am focusing on the impact of spend down on our foundation’s overall mission and what lessons might be generalized in this arena.
Time, as a concept, is a phenomenon about which so much has been written, but less so within the philanthropic field. While the missions of many foundations deal with the most compelling and time-critical issues on earth, the reality of the perpetual foundation is that perpetuity is indeed a long time.
We (foundations) can experiment, develop theories of change, revise these theories, find different partners, and move at a pace that is at dissonance with the compelling nature of our missions.
When the determination of 2016 as the ending year for ACBP was made in 2001, it seemed like a long way off. For the first few years, other than a spending rate that was significantly greater than 5%, little changed.
But by 2007, the reality of the 2016 spend down date brought the board and senior management to a serious place in determining final strategies and tactics.
For some time, ACBP had managed as an operating foundation – creating programs, developing sustainability plans, recruiting partners, hiring management, building governance, and conducting all of the activities that had each of these entities become more than the sum of their parts. ACBP believed that its public presence is far less significant than that of its incubated organizations.
The tables below show the financial outcome of this philosophy for ACBP’s three core programs: Birthright Israel globally, Project Involvement in Israel, and Historica Canada in Canada.
As is clear, while ACBP’s financial contribution to these organizations began to taper off, their aggregate budget grew dramatically, underscoring one of the operating principles of ACBP that programs need to be mission-driven and leverage-sensitive. It is an important achievement for each of these three programs at the core of ACBP’s mission.
The reality of the 2016 spend down date drove a process, including the use of outside consultants such as Cambridge Leadership Associates and Bridgespan to assure that these programs would be “best of breed” as ACBP came close to its spend down.
The reality of a closing date had both a concrete impact on the decision-making regarding each of these programs as well as a huge impact on the motivation to be certain in that all of the pieces were in place for sustainable growth.
I am not certain that grantmaking foundations deal with the same dynamic as those foundations, such as ACBP, developing and incubating entities that deliver and fulfill an overarching foundation mission.
Specifically, ACBP annual grantmaking ended in 2012 with no less than three years notice to each of the grantees. For the six smaller incubated projects, an aggregate sum was determined by 2010 for their continued support through 2016. In each case, the program’s management was given the choice of the time over which this sum would be distributed.
In retrospect, it is an error to believe that management best knows its revenue flow needs. Whereas each grantee would have benefited from a longer term phase-down approach, each chose to complete their ACBP funding within three years and several have regretted that decision.
So we should not forget that in addition to the financial support, the brand credibility of ongoing foundation support is often helpful in obtaining or maintaining other donors.
Many of these factors are significant in terms of the implications of the spend down decision, and how the mission of a foundation plays out in various stages of its life.
I will leave for future blogs some of the more challenging notions including reductions in force, space reductions, asset sales and the emotional impact that the spend down has in the engagement of senior management.
Jeffrey Solomon is President at The Andrea and Charles Bronfman Philanthropies.
[eJP note: “Making Change by Spending Down” is a new commentary series of The Andrea and Charles Bronfman Philanthropies (ACBP) – in partnership with the Foundation Center – to share insights and lessons of ACBP as it spends down its endowment by 2016 and closes. Each month various stakeholders will contribute new posts that will explore how ACBP’s decision to spend down affects a broad range of interests: from mission, employees and grantees, to investments and legacy. Decision makers across the social sector will benefit from the first-hand knowledge and community of learning being created.