Like Fireworks? Don’t Look to Jim Canales and the Barr Foundation. Not Yet, Anyway

When James Canales, then the chief of James Irvine Foundation, was named president of the Barr Foundation in late 2013, many people didn’t quite get it. Why would a guy jump from a regional foundation in San Francisco with nearly $2 billion in assets to a smaller regional outfit in Boston?

For one thing, did Canales—a California native—realize just how brutal Boston winters could be?

In a recent conversation, Canales chuckles when I mention the weather, admitting that this past winter—a record-setting Arctic nightmare for Bostonians—was the first he’d ever spent outside of the Bay Area. Canales started his new job in May 2014. Within half a year, a nonstop string of snowstorms would be pounding the city. Great timing, right?

Canales hadn’t sought the Barr job, but started to come around to the idea after a lunch with Amos and Barbara Hostetter, the older billionaire couple behind the foundation. While Barr has around $1.6 billion in assets, the Hostetters have another $3 billion on the sidelines—wealth that could, in theory, be used to double or even triple the size of the Barr Foundation. When Canales’s selection was announced, a press release said that he would “lead a strategic planning process to explore how Barr might grow over time, leveraging its local work, taking good ideas to scale, and extending its impact regionally, nationally, and internationally.”

Those words seemed to imply that the Hostetters had big plans to take things to the next level, which would explain why they wanted to hire the foundation’s first-ever CEO. In turn, some imagined at the time that such ambitions are what pulled Canales in. Jumping from one regional foundation to another doesn't sound like such a hot career move, especially if you have to buy your first winter wardrobe—unless you're getting the chance to build a major new national foundation almost from scratch.

Canales won’t say if some great financial windfall lies down the road for Barr, but so far, there’s nothing to suggest that the foundation, which is best known for its Boston funding, is looking to be a bigger fish in the philanthropy pond. Indeed, one of Barr’s most notable moves since Canales arrived was to wind down a pilot program of global grants started in 2010. Meanwhile, Barr hasn’t added any new issues to its longstanding portfolio of arts, education, and the environment, and most of the funding priorities it’s pursuing within these areas in 2015 are locally focused.

In other words, Boston nonprofits can breathe easy for now. Their great benefactors, the Hostetters, haven’t forgotten their hometown sweetheart and run off with a hotshot foundation exec in search of bigger things. Not yet, anyway.

Which leads to the question: What exactly has Canales been up to since taking over at Barr?

Managing “Tensions”

Well, as promised, he’s been presiding over a strategic planning process, which is ongoing. But this process isn’t the kind where you bring in the troops from Bridgespan, concoct an elaborate new game plan, and then roll it out in one fell swoop. Instead, Canales has kept to a promise he made a year ago, when he said that change “will be gradual and evolutionary. It will be carried out in a respectful and transparent way.”

Canales, who spent over a decade running Irvine, is a keen and subtle thinker about foundations, and he describes the CEOs of these places as leaders who manage key “tensions” within the institution. There is a natural tension, he says, between “constancy and change”—having staying power on a set of issues, but also tackling new things. As well, there’s tension between tackling urgent challenges and having a long-term perspective. A foundation wants to have a strategy and focus, but also flexibility.

Different funders do better or worse jobs of striking the right balance. Some can’t help flitting after shiny objects, while others are so rigidly programmed that Armageddon could happen and they’d stick with their three-year plan.

As the first president of a family foundation, Canales is in an especially delicate situation. When he came to Barr, Canales became the third member of a board of directors made up solely of the Hostetters, a couple that’s been engaged in hands-on grantmaking for many years—first anonymously, in many cases, and then through Barr, established in 1997.

Which is to say that all the tensions Canales must navigate have a deep personal dimension, leading back to the Hostetters’ interests and relationships. That’s a very different situation to walk into than, say, taking over a legacy outfit like the Ford Foundation. And it’s one that requires a very particular kind of emotional intelligence that, from the looks of it, Canales has in spades. He talks of ensuring a “continuation” of what came before and describes a “through-line” of grantmaking on issues that the foundation has been working on for years.

At the same time, he’s been pushing steadily forward with his mandate, which is to lead the foundation in taking stock of what’s working, what’s not, and where Barr should go next. As Canales describes it, nothing has been kept off the table and all the foundation’s work has received scrutiny.

When he first arrived, Canales started with the most basic of exercises—clarifying the Barr Foundation’s values. “Any planning process at a foundation needs to be rooted in values, and what really matters to the institution,” Canales says, making a point that might sound obvious until you learn that many foundations can’t actually articulate their values. Foundations run by living donors, in particular, often fall short on this front, perhaps since the donors know perfectly well what they believe and thus see no point in writing it down.

Canales set out to answer this question: “What is core about the DNA of the Barr Foundation?” Among other things, the values statement that emerged stressed taking a long-term perspective, embracing risk, and acting with humility. That last value is particularly intriguing, because it addresses another balancing act that Canales took on in moving to Barr. His mission is to raise the foundation’s game, but he’s working for a couple that has been reluctant to draw too much attention to their philanthropy. It seems that what Canales is trying to build at Barr is the kind of foundation we’d all like to see more of: a professional outfit run by smart people, but not a place that gravitates to the driver’s seat or throws its weight around.

“We're not doing the work directly, we’re enabling others,” Canales says. “We need to make sure to avoid arrogance.”

Words like that, of course, are music to the ears of nonprofits, and stylistically, Canales seems like the kind of funder who is helpful but who doesn’t think he's smarter than you.

Ambition and Risk

A possible embrace of risk taking at Barr is more of an open question. Talking to Canales, and examining his first year at the foundation, I didn’t sense much of a push to think big, as in: We’re sitting on a billion and half bucks, with plenty more where that came from. Let’s place some major bets that could really move the needle on our issues.

So far, at least, it seems that constancy is proving a stronger force at Barr than change. The foundation’s new mission statement, which was rolled out in January, said the foundation will “cultivate and advance those breakthrough ideas that will shape our collective future.” But that same statement affirmed that the foundation would keep working in its same three program areas—education, climate, and the arts. And if the foundation once toyed with big ambitions beyond Boston and New England, it’s put those on hold. In addition to killing its fledgling global programs, any large-scale national grantmaking seems unlikely in the near future. 

Canales says that the conversation over national funding is “alive and well,” but also says that “we’re most likely to stay focused regionally.” He adds that there “may be opportunities for us to engage in selective national work.” Canales pointed to the foundation’s involvement in ArtPlace, a national funders collaborative, as an example of this. There are some other places, too, where Barr is engaged nationally. But make no mistake: Right now, the foundation’s trajectory remains as it was: as a regional funder, and even more narrowly, a Boston funder.

In an age when too many foundations try to do much, Barr’s contained agenda does make sense. With its level of resources, it can do a lot of good working just three issue areas in one geographic area. Making a dent nationally would be much harder.

Still, the tone and direction of things at Barr feels like a letdown. The paradox here is that, substantively, much of Barr’s program work is at the cutting edge of its funding areas—for example, it’s deep into the red-hot issues of pre-K, using the arts to drive urban renewal, and also smart growth and clean energy. But a larger sense of urgent ambition seems lacking.  

Recently, Canales published a review of his first year at Barr that was, well, humdrum—pointing to more transparency, a new website, and some other minor stuff. What we didn’t hear was a rallying cry from a newly charged-up funder that’s ready to move heaven and earth to achieve impact—and sooner rather than later.

Maybe I’m spoiled. We write at IP about a lot of funders that are laser-focused on finding leverage points that hold the promise of yielding systemic change and don’t spend a moment thinking about payout rates. Just the other day, we were on the phone with Howard Buffett, who’s placing some pretty radical bets, following his dad’s adage that philanthropic money is “risk capital for the general betterment of the society.” Buffett doesn’t have some fancy methodology, but other emerging funders are quite articulate about how, exactly, they’re trying to be catalytic and transformative.

There’s not much evidence of a venture mindset at Barr. Its new mission statement says it wants to be a “catalyst,” but it doesn’t say how it wants to do that. And while Canales’s inclination toward “gradual and evolutionary” change seems quite sensible, the vibe here feels at odds with any real risk taking. If you pull Barr’s 990s for the past few years, you’ll find it hewing to the foundation world’s normal low payout rates, even as the Hostetters keep a large fortune on the sidelines. Dozens of Boston schools are failing, many of its arts groups are struggling to survive, and this coastal city may well find itself under water one day as the seas rise, but none of those urgent facts, apparently, trump the greater potential catastrophe of an eroding endowment.

The other thing about Barr is that even as a new generation of lean foundations comes on the scene and aims for high impact by making large general support grants to a limited number of groups, Barr has embraced a more traditional model. It spreads its money widely across many grantees, and Canales says that two-thirds of grants take the form of program support. Meanwhile, most nonprofits say in surveys that they need general support to be maximally effective. Another downside of the program support model is that it’s staff-intensive and expensive, diverting money away from the ultimate intended beneficiaries of philanthropy. Barr is still a lean foundation compared to places like Ford and Rockefeller, but its overhead is way higher than many of the new lean foundations, and it has added some new staff under Canales.

To be fair, it’s still early in Canales’s tenure, and important conversations are ongoing at the foundation. For example, Canales says that “we have left an opening for the potential to add new areas” beyond the foundation’s three longstanding priorities. He won’t say how much new money is likely to flow into the foundation from the Hostetters, or when, and perhaps doesn’t know himself. But Canales does say that “it is clear that this foundation will be undergoing a period of growth and expansion over time. There is no timetable for that. It will depend on what emerges from the strategy.”

Ultimately, the Barr Foundation’s reinvention remains a work in progress, and it’s premature to make any firm judgments about how this place will change in its new phase.  

A Bolder Future?

One reason to fret about a potential missed opportunity here is that this is a foundation with just three board members, two of whom are the living donors. Years of grantmaking means that the foundation doesn’t have a blank slate, but in the grand scheme of things, it has immense latitude to do whatever it wants. It’s no coincidence that the biggest risk takers and boldest funders today are living donors with few constraints.

Which raises the question: How do the Hostetters think about philanthropy and how much are they setting the vision?

Canales didn’t say much about his working relationship with Barbara and Amos Hostetter. But one thing that can be said for sure about them is that they’re light years ahead of most billionaire couples when it comes to philanthropy. They’ve already put a sizeable slice of their fortune into the Barr Foundation and have made some big moves in the past—most notably, their charge into climate work in 2010 with a $50 million, five-year initiative. In a rare interview in 2011 with the Boston Business Journal, Amos Hostetter—who made his fortune, by the way, as a hard-driving cable TV entrepreneur—had this to say: "If the country and world don't wake up to this issue, civil unrest, food shortages, hunger riots, cities underwater are in the cards... virtually every other issue pales in comparison to climate change."

Now there’s a funder who gets it. On the other hand, a clear sense of restraint surrounds the Hostetters’ giving. They embrace a service ethos when it comes to their philanthropy, as opposed to some of the brasher funders that often grab attention with schemes that may or may not work. Just as the foundation’s values include humility, its mission statement says, point blank: “We exist to serve.” The mission also flags acting as a “steward” and puts that goal on an equal footing with being a catalyst.

Again, these are welcome sensibilities in a philanthropic sector in which funders routinely overreach and try to put themselves in charge. But one does wonder whether the Barr Foundation’s DNA is really that of a change agent. Is this a place that’s sliding toward the familiar role of the staid local legacy foundation that is a loyal friend to innumerable nonprofits? Or does it have some truly big plays up its sleeve as the rest of the Hostetter billions come online?

The foundation’s next move on climate change will be telling in this regard. The five-year, $50 million first leg of that work is now coming to a close, and Canales says “we’re thinking about what the next stage of work might be.” Asked how ambitiously the foundation was thinking, Canales said, “We’re saying to the program team that it’s time for us to be sufficiently bold in working on this.”

Canales says that, personally, he isn’t thinking so much about scale or resources, or what may lie ahead in terms of more capacity. Rather, he emphasizes clarity with regard to Barr’s values, mission, and priorities. Once those key building blocks are securely in place, he says, the foundation can turn to next steps. 

And, as with so much of what Jim Canales has to say, that sounds pretty sensible.