Manifesto Watch: This Fed Up Funder Totally Nails How His Own Sector Needs to Change

All sorts of people who work in or around philanthropy spend a lot of time shaking their heads at how screwed up this sector is.

In fact, you could draw up a typology of critics: the consultants who parachute into foundations and have a bird's eye view of their dysfunctionality; the nonprofit veterans who've wanted to throttle any number of their program officers; the watchdog groups that gripe about wrongheaded grantmaking priorities and strategies; the former foundation execs who've been kicked to the curb by controlling boards—or who run screaming from the room voluntarily.

Of course, there are also those who enter philanthropy from business and find themselves appalled by the rampant mediocrity and underperformance in a sector that has no bottom line and is accountable to no one.

Paul Shoemaker might fit into this last category. Shoemaker, who has an MBA, came to philanthropy in 1998 after a career at Microsoft and Nestle before that. Since he made the switch, he's been a top executive at Social Venture Partners Seattle, a funding group. It's an interesting outfit that works all sides of the change equation: helping donors figure out where to give their money, working with nonprofits to achieve impact, and thinking hard about how to best connect the dots in a social sector that, so often, is way too fragmented.

That work has given Shoemaker a keen grasp of what's working and what's not, when it comes to using private money to make change. Shoemaker also served as board treasurer of Grantmakers for Effective Organizations for a number of years, and serves on the board of Partners for Our Children in Seattle. In 2011 and 2012, he was named one of the “Top 50 Most Influential People in the Non-Profit Sector” by the NonProfit Times.

During his 16 years in and around philanthropy and nonprofits, Shoemaker piled up a growing list of ways the sector could do better—to the point that he's now talking about reconstructing philanthropy altogether. He has a long essay out in Stanford Social Innovation Review about how to do exactly that.

Shoemaker's agenda mixes together familiar elements, such as a call for more general support and long-term funding, with some newer themes that have been getting traction lately. These include the need for funders to learn more from peers, building better boards, and really listening to the people they're giving money to. Shoemakers argues further that the key is to blend together these best practices, and that if funders do so, "we can make quantum leaps in achieving greater impact for our communities and our world."

Shoemaker will be the first to say that his ideas are hardly earth-shattering. The problem is that these ideas haven't been acted on. He writes: "They’ve been talked about for years, but are still not practiced nearly enough. Some funders are doing better on a few of these, but the absence of many of these practices applies to most all funders."

Given how much work needs to be done, perhaps the biggest value of Shoemaker's essay is that he deftly pulls together the case for doing things differently in one place, and offers up a wealth of examples to reinforce his argument. If you want a clear and concise blueprint for overhauling philanthropy, here it is—presented with barely suppressed rage. The CliffNotes version follows.

1. Provide 100 Percent of Funding in Unrestricted Support

"The most destructive practice in our philanthropic system is restricted funding, i.e. the myriad of ways funders and donors constrict their funding," Shoemaker argues. Such funding, he says, is "flawed in its implicit assumption that the funder knew best how to solve a community problem. How could a funder, by definition, know more than a community-based NGO about a community problem? And if it does, something is wrong in the first place."

Amen, brother. Shoemaker lays out one of the better cases against restricted support you'll find anywhere and calls for wholesale change in grantmaking. This will be tough, since—after years of similar calls—the latest study by Grantmakers for Effective Organizations found that only around a quarter of foundation grants now take the form of general support.

2. Fund for the Long-term

"In most cases where philanthropy has been effectively deployed to truly help change a social outcome, the investment timeframe was at least ten years," Shoemaker writes. Yet many funders go skittering away from a challenge after investing for a much shorter period of time.

As examples of effective long-term funding, Shoemaker cites conservative funders that have invested over decades in think tanks that have changed key areas of public policy. There are other examples out there, and the good news is that many funders do stick with things for the long haul. Just this week, for example, the Robert Wood Johnson Foundation re-upped for another $500 million in its long campaign to fight childhood obesity. Another case study: MacArthur and Annie E. Casey have finally been seeing real payoffs from work on juvenile justice that both foundations started in the 1990s.

Alas, there are myriad counter-examples, and this is another area where best practices are well known, yet routinely ignored. That's got to change, says Shoemaker, and funders have to get past their worry about creating "dependency."

3. Connect to Peers

For all the hoopla around "collective impact," and all the funders collaboratives you see popping up, a great many funders still go it alone. And why not? Nobody's making them do the hard work of collaborating even as they push nonprofits to do that hard work. As Ed Skloot, former CEO at Surdna Foundation, told Shoemaker: “philanthropy is still a solo, fragmented, ego-driven often rigid, way to help communities.”

Many people believe this needs to change, and here again, Shoemaker isn't breaking new ground. But he nails the case for collaboration with force, and draws from his own experience working with other funders in Washington State. He writes: "Sustained relationships between funders have to become a core, inherent practice, not a 'nice-to-have' or isolated initiative."

4. Build Strong Boards

A philanthropy consultant recently used this word to (privately) describe her view of foundation boards: "INSANE." And you'll often hear some variation of that same sentiment.

Shoemaker has thought a lot about boards in his work at SVP Seattle, and his ideas on how to make them stronger apply to all organizations in the social sector. But he makes a big point that funders, many of whom hector nonprofits to bolster their boards, need to do a better job here themselves:

Our funder boards are inherently insular and disconnected, if we don’t work against some natural forces... We are going to have to self-impose better Board practices. If we don’t we’ll continue to “feel good” inside the Board room, divorced from the reality of what we are not accomplishing outside.

5. Listen to Beneficiaries

The need to better listen to the so-called "end users" of philanthropy has been getting some attention lately, as a new funder collaborative has cranked up to focus on exactly that challenge. So it's not surprising to find this point also on Shoemaker's reform hit list:

As funders, we are too removed from and don’t listen to the voice of the customer nearly enough... Many times the deliberations between nonprofits and funders are sometimes an echo chamber in the absence of a vital third voice in the room, the beneficiaries.

Shoemaker notes that corporations spend fortunes listening their customers and using that information to improve their performance. It's high time nonprofits and foundations did the same. If they don't, disaster can result, and Shoemaker's top example is the $100 million Zuckerberg grant in Newark.

The key flaw in this philanthropic investment was not a lack of good intentions by Zuckerberg or Mayor Booker, it was the lack of connection to and engagement with the ultimate customer, the community... the citizens of Newark ultimately rejected the “architecture” of their school system that had been designed for them, but not with them. As they say in the private sector, “the customer is always right” and in Newark, the customer spoke.

Shoemaker says it won't be easy for funders to get a better fix on the needs of their ultimate beneficiaries, since nonprofits are the ones dealing those folks and the funder is at an inherent remove. But he suggests some ways to get at this challenge.

***

After laying out the key points of his reform agenda, Shoemaker shows how they all can fit together to get that "quantum leap" in impact that everyone would love to see.

But because nobody is going to force foundations to make these changes, Shoemaker says funders "will have to largely self-impose change in our practices." He suggests some kind of pledge or commitment by funders to do that, which is not a bad idea. (The National Committee for Responsive Philanthropy has done similar work in pushing funders to adopt best practices, such as providing high levels of general operating support.)

Of course, getting foundations to work together is like herding cats. Maybe Paul Shoemaker's next act will be to take on this work. He certainly knows which way the cats need to go.

Related Articles: