Philanthropic Foundations React Dynamically But Intentionally to External Pressures

By Shalina Omar

In her recent study, Dr. Amanda Stewart reveals that foundations are moving towards a more structured and intentional approach to charitable work, including being more selective in grantmaking, taking on roles beyond check-writing, and developing deeper relationships with their nonprofit partners. Dr. Stewart, an assistant professor in the Department of Public Administration at North Carolina State University, interviewed representatives of 29 foundations in one southeast state to take a peek into the “black box” of philanthropic foundations: the largely unseen process of transforming foundation resources into their charitable benefits.

This research provides insight into how foundations adapt to a shifting environment, such as the 2008 financial downturn, by taking on new roles and becoming more deliberate in their behavior. Dr. Stewart shows that foundations are moving towards the more formalized style of “strategic philanthropy” and away from a looser method of check-writing.

Study’s Key Findings

Dynamic Foundation Behavior

Against the backdrop of the 2008 financial crisis, Dr. Stewart found that foundation strategies are evolving rather than static. Internally, change may come from leadership transitions or new research insights. Externally, pressures may include evolving community needs, strains on foundation resources, or pressures to be more like their peer organizations.

There is a shift away from the traditional check-writing role towards an outcome orientation focused on issues and impact; some foundations are even becoming directly involved in charitable work and initiatives. This shift of focus from input to output demands diverse skills and abilities, requiring foundation staff to move between the roles of supporter and doer.

By delving deeper into foundation strategy, Dr. Stewart hopes to connect the dots between how foundations’ motivations and rationale inform their approaches towards philanthropy. In her study, she describes the adoption of strategic philanthropy and how that plays out in foundation behavior.

Adoption of strategic philanthropy

Dr. Amanda J. Stewart

Dr. Stewart found that strategic philanthropy has become the norm for many foundations and these organizations have had to adapt their strategies to react to the changing economic landscape. In the wake of the 2008 financial crisis, foundations reported maintaining or even expanding grantmaking and establishing new efforts to meet emerging community needs. . In an effort to free up grantmaking resources, a few foundations responded by trimming staff and internal costs.

In the development of their strategies, foundations have aimed to draw on all their assets beyond financial resources. This has included taking advantage of staffing capacity, research insights, and their leadership position in the community. The more foundations had success with strategic planning, the more they gained confidence to keep the ball rolling. A strategic plan enabled foundation leadership to be more “deliberate and intentional” by using it as a point of reference on a day-to-day basis. Foundations even reported the value of the strategic-planning process itself in promoting a spirit of openness, questioning, and understanding in defining strategic goals.

Shifting behavior in foundation relationships, roles, and grantmaking

Three core behaviors indicate a foundation’s shift towards a strategic orientation: a focus on relationship-building, diversification of foundation roles, and a selective approach to grantmaking.

Moving away from the traditional top-down grantor-grantee model, foundations are actively pursuing partner-type relationships with their nonprofit beneficiaries. Relationship-building is also important due to the limits on foundation resources, motivating a shift in some foundations towards a collective-impact approach or encouraging collaboration among grantees.

As foundations are changing how they relate to their nonprofit partners, they are also expanding their roles beyond that of the traditional check-writer, including roles such as “advocate,” “convener,” “navigator,” and “resource.” Role diversification is particularly prevalent for foundations with paid staff as it requires experienced personnel that can navigate the politics and cultures across organizations. Foundations consider this a “mission-serving” allocation of resources given that staff expenses can be included as a part of the payout requirement.

Strategic philanthropy also affects grantmaking, as some foundations are prioritizing nonprofits that fit into their strategic goals and allow them to respond to emerging needs in the community. Interviewees also mentioned a shift towards fully funding fewer grantees rather than partially funding a greater number in order to maximize impact while others have encouraged a collective-impact approach.

Implications for Nonprofits

As foundations change and evolve, nonprofits must also adapt to the dynamic landscape of foundation operations, particularly in three key areas.

First, Dr. Stewart’s study emphasizes that building a relationship with their nonprofit partners is an increasingly important process for strategically oriented foundations. Second, as foundations take on new roles, nonprofits also have to step up with corresponding roles to successfully engage with foundations. And third, though a foundation’s strategic objectives may not be transparent, nonprofits should still seek out partnerships with foundations with aligning mission goals.

Although the inner decision-making process of foundation behavior is still largely a “black box,” Dr. Stewart’s findings give us an advantageous peak inside.

Shalina Omar is pursuing a Master’s of Arts Degree in English with a concentration in Sociolinguistics at NC State University. She is currently an intern to the Philanthropy Journal and a teaching assistant in the NCSU linguistics department.