Julia Stasch Atop MacArthur: Change or More of the Same? Maybe Both

When the MacArthur Foundation sacked its president, Bob Gallucci last year, saying it was looking for "a new kind of leadership," we thought we'd seen this movie before. You know the one: When a legacy foundation decides it needs to get with it by recruiting a McKinsey-type outsider to shake things up with a bunch of fancy models.

We thought it'd be an action movie, too, with a title like The Disruptor, in which longstanding grant programs and staff get mowed down by a PowerPoint-toting 45-year-old who doesn't give a damn about the delicate ways of foundation culture.

But that's not the movie that's going to be playing at MacArthur, judging by Wednesday's announcement that Julia Stasch will be its new president. Stasch has been the interim president since Gallucci's exit and, before that, had been the vice president for U.S. Programs. Her first job at MacArthur, which she joined in 2001, was running its Program on Human and Community Development.

So the movie playing instead is another familiar script: Triumph of the Insider. This storyline has fewer explosions, but definitely more intrigue. How does someone go from running a program at philanthropic behemoth MacArthur, with its endowment of over $6 billion, to running the whole place—after her boss is conveniently removed from the picture?

Well, for one thing, it helps to have ambitious ideas and know how to get stuff done within the very particular ecosystem of a large foundation, which is Stasch's reputation. Most recently, she presided over the launch of MacArthur's super-timely new $75 million initiative to reform U.S. jails. It also can't hurt to be a skilled bureaucratic operator. Stasch, remember, once thrived within the deadly snake pit of Chicago politics, rising to the pinnacle of that world to become chief of staff to Mayor Richard Daley. Pushing upward within the cushy environs of a foundation must have felt like a trip to Aruba after her time at City Hall.

Ultimately, though, the question of how Stasch rose at MacArthur is far less interesting than what she'll do now that she's on top. And the big thing I'm wondering is this: Will Stasch streamline an overstretched foundation that tries to do way too much? And if she does, what will that mean for existing programs and grantees?

This challenge definitely appears to be on her mind. Among Stasch's achievements touted in the press release on her appointment was that she had "begun to focus the foundation on fewer programs to free up future resources and enable deeper impact." On the other hand, in an article in the Chronicle of Philanthropy, both Stasch and board chair Marjorie Scardino said the foundation had no plans to change its areas of focus.

How bad is MacArthur's overstretch? Bad. The foundation currently lists 18 programs on its website, with various special projects and research networks on top of that. In 2013, it sliced and diced a $228.4 million grantmaking budget across its many priorities by making 556 grants—none of which were over $5 million and many of which were more modest program grants. A study looking at Mac's 2011 grants found that just 20 percent took the form of general support.

How can MacArthur hope to deliver a knockout punch on any of its causes by sprinkling its money so far and wide? It can't. Which is why many of the new funders on today's philanthropy scene are focusing resources more narrowly and placing fewer, bigger bets to achieve impact. These funders tend to give money in large chunks of general support, allowing them to operate with few staff and freeing up more resources to make change. (See IP's recent profile on Herb Sandler, for example.) My hunch, as I've argued here, is that the bureaucratic foundation model embraced by big legacy outfits like MacArthur will be largely discarded over time. New funders will lead the way in this shift, but legacy outfits will follow after they get tired of watching leaner, more strategic shops stretch dollars further for more impact.

Is Julia Stasch interested in putting MacArthur ahead of that curve? Good question. Certainly she could free up big resources with a different operating model. To administer its innumerable programs and grants, and pursue a grantmaking strategy that most nonprofits loathe (because everyone hungers for general support), MacArthur spent nearly $40 million in 2013 on personnel and travel costs, and millions more in consulting and professional fees. That overhead is not unusual among big foundations, but it's more money than many medium-sized foundations lay out in total grants. It's easy to imagine such funds being put to better use.

Julia Stasch is hardly alone in confronting a legacy foundation that's trying to do too much, with an approach that drives grantees nuts and burns a fortune on overhead. Darren Walker at Ford is now engaged in a tough struggle to rein in that institution, which is stretched even more thinly. (More here.)

The challenge of reforming these places is considerable, even for foundation CEOs determined to swing the axe. Institutional commitments pile up over time and have strong defenders among staff and board. And change can mean reneging on obligations to longstanding grantees in painful ways. As anyone in Washington knows, it's easy to create new programs and much harder to kill them. (See my analysis of institutional calcification in foundations.)

While no foundation president wants to get caught up in internal bloodletting, which can quickly become the defining headline about their tenure, the alternative is to continue diluting resources across too many areas.

In another hopeful sign, though, Stasch does seem intent on pushing MacArthur to make bigger, bolder bets. The new jails initiative is one example, coming at time when the pendulum is swinging on criminal justice; Mac's $75 million could help it swing faster. Even more intriguing is Stasch's announcement Wednesday that the foundation will create "a new competition that will offer $100 million for meaningful progress in solving a single important social problem."

Now there's a big bet—if the money isn't spread over too many years and doesn't go to too many "winners," in effect becoming yet one more grant program on top of everything else MacArthur is doing. We've seen competitions with big price tags devolve this way before.

Details are sketchy on the competition—and one foundation veteran clucked to me that it sounded like "money in search of a problem"—but there's no reason to not be hopeful at this point. Mac's VP for Public Affairs Andrew Solomon told me, "We believe that such a large incentive will attract and support the kind of creative, urgent, large-scale problem solving that our society needs."

That sounds cool, and maybe just the thing MacArthur needs to get more mojo. This is a foundation, after all, that's still best known for a signature program (the "genius" fellowships) launched in 1981, despite all the great work it's done since then.

The other indication that Stasch wants MacArthur to be bolder is the news that the foundation is creating a "new effort to deliver useful capital for the social sector through the creation of market-making investment products and tools." Here, too, details are sketchy, but basically, MacArthur's goal is to ramp up its decades-long leadership in impact investing at a time when this trend is spreading fast.

Solomon says, "The effort will draw from MacArthur’s $300 million pool of impact investment capital," and among other things, "dedicate significant funds to ensuring that there is continuous and openly shared learning with the entire impact investment marketplace as this new work unfolds."

That sounds cool, too. And so, with a closer look, the picture becomes clearer of how Stasch will likely lead MacArthur. She'll be looking to achieve major breakthroughs by placing bigger, riskier bets. And she'll expand MacArthur's role in impact investing, an area where the foundation has been especially innovative in recent years.

As for streamlining the place and freeing up more resources for big bets, we'll have to wait and see. If Stasch does wield the ax, she'll probably do so stealthily, as a Chicago pol might, so that any internal upheaval doesn't overshadow the more important story she's surely hoping to write about MacArthur: That of a foundation with new vision and energy—and growing impact.

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