Social Justice and a Relevant Philanthropic Sector (Part 2)

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Miles Wilson is a philanthropic professional with nearly 30 years of experience supporting the U.S. social sector as well as past efforts in Northern Ireland, the Netherlands, and South Africa. Miles’ work has covered a broad spectrum of core social sector activities, and he currently serves as the Deputy Director of Education Grantmaking at Ascendium Education Group. Miles was most recently a Senior Fellow with the Aspen Institute Forum for Community Solutions. This feature, Social Justice and a Relevant Philanthropic Sector, is the second in a six-part series of blog posts about his experiences in philanthropy. A version of this blog series is running on the Center for Effective Philanthropy website. Read the first post in the series here.

The inequitable power structure and underlying systems in philanthropy are, in fact, part of the same systems in our larger society that were designed at our nation’s founding to enshrine power, control, and prosperity in white America. These underlying systems have undone many hard fought efforts to create a more just and equitable society.

Despite decisions such as Brown v. Board of Education, and passage of the Fair Housing Act of 1968, America’s schools and neighborhoods remain largely segregated. It’s also why in 2013, following the U.S. Supreme Court’s dismantling  of core elements of the Voting Rights Act,  Justice Ruth Bader Ginsburg described an evolution of “first generation barriers to ballot access” to “second generation barriers to ballot access.”

It is not lost on me that as I write this paper, deeply troubling, and frankly, dangerous issues of either implied or overt racism are regularly leading news headlines in America since the election of Donald J. Trump as President of the United States.

Various analysts suggest the President’s comments appear to be providing encouragement to white supremacists to bring their racist views out in the open.  In fact, most Americans believe race relations in America are worse under the current administration. America is far from dealing with its issues on race, and that an underlying system driving old social norms around race appear to be alive and well.

These underlying systems are both persistent and overlapping supports to a particular social norm, and philanthropy is not immune.

My colleague Gwen Walden, San Francisco Managing Director of Arabella Philanthropic Advisors recently wrote that: We should also accept that philanthropic efforts have frequently, in practice or effect, perpetuated and extended inequitable power structures that they should have sought to undo.  

 

The inequitable power structure and underlying systems in philanthropy are, in fact, part of the same systems in our larger society that were designed at our nation’s founding to enshrine power, control, and prosperity in white America. These underlying systems have undone many hard fought efforts to create a more just and equitable society.

Unless these underlying systems are pulled out completely and replaced with systems that are at their core just and equitable, they will always reappear in some other place or form to maintain the power status quo. Therefore, it must become a serious priority to remove these inequitable and unjust systems from within organized philanthropy as well; from its hiring practices, staff development, executive leadership development and accountability, board appointment processes, grantmaking, financial management, and vendor selection processes just to name a few.

There are four important areas where I recommend the sector changes how it conducts business. These changes will improve the overall impact of philanthropy but also support the broader case I have made about social justice and DEI.

General operating support, evaluating impact, recruiting and retaining people of color, and social justice funding are areas where organized philanthropy has struggled to adapt, and where a meaningful resolution will help foundations and nonprofits to perform at their highest levels.

I hope that a real partnership between foundations and nonprofit organizations becomes the norm and not the exception. I also hope that America’s foundations will act as a field to ascend the moral high ground in a role that organized philanthropy is uniquely positioned to play as both benefactor and important voice of the nation’s social conscience. 

There’s an ongoing debate about the use and value of project support grants versus general operating support grants. I’ve heard and participated in this debate for as long as I have worked in philanthropy.

Project support grants are for a specific effort or project of a nonprofit organization. Often times project support grants do not include the costs of the overhead and infrastructure necessary to conduct the project; however sometimes grantmakers will include an allocation for “reasonable overhead costs” (defined by the foundation rather than the actual costs calculated by the organization).

Conversely, general operating support grants are unrestricted and support the entire organization, allowing its leadership to allocate the grant in whatever manner it sees fit to further the organization’s overall mission and performance.

In practice, project support grants far exceed the number of general operating support grants provided by grantmakers.

Many nonprofit organizations find themselves fundamentally weakened in their ability to sustain themselves and the infrastructure necessary to ensure impact on their mission and the constituencies they serve.

Over the years, many field researchers and practitioners have thoroughly documented the negative impact of not funding or partially funding overhead costs. One such case is in a Stanford Social Innovation Review article called the Nonprofit Starvation cycle. Its author’s state: 

Our research reveals that a vicious cycle fuels the persistent underfunding of overhead. The first step in the cycle is funders’ unrealistic expectations about how much it costs to run a nonprofit. At the second step, nonprofits feel pressure to conform to funders’ unrealistic expectations. At the third step, nonprofits respond to this pressure in two ways: They spend too little on overhead, and they underreport their expenditures on tax forms and in fundraising materials. This underspending and underreporting in turn perpetuates funders’ unrealistic expectations. Over time, funders expect grantees to do more and more with less and less—a cycle that slowly starves nonprofits.

Though the Nonprofit Starvation Cycle was published in 2009 little has happened in the sector to reduce the relevance of its message that nonprofits are being starved to death for lack of grants that fully cover overhead costs. More recently, the three leading national organizations monitoring charity accountability and transparency, Give.org, Candid, and Charity Navigator have issued joint letters called “The Overhead Myth” reinforcing the challenges created by funders’ lack of support for overhead costs.

The vehicle of project support grants that either lack or underfund overhead costs should be the exception in grantmaking rather than the rule. Further, project support grants are a level of unnecessary control and micro-management that demonstrates a lack of trust in the organization’s leadership to do their jobs properly.

If this is the case, and it is demonstrated through solid due diligence, then the organization should not be funded. But to penalize both the good and the bad while weakening the entire field in the process makes no sense at all.