building financial strength and program quality - GrantCraft · grantcraft P R A C T I C AL WISDOM FOR GRANTMAKERS building financial strength and program quality: a case on grant

grantcraftP R A C T I CA L W I S D O M F O R G R A N T M A K E R S

buildingfinancialstrengthandprogram

quality:a case ongrant making

to strengthencommunity

foundations

“What a wonderful—and comforting—resource this is! Whilethese cases are about grant making at a major national

institution, I found them relevant to my experience incommunity and family foundations. They are full of rich and

accessible lessons for any funder, a model for learning from one’s own practice.”

MELINDA MARBLEExecutive Director

The Paul and Phyllis Fireman Foundation

“These cases illuminate many of the key decision-makingchallenges that grant makers face in building strong

programs. They’re an excellent resource for all types offoundations.”

KATHLEEN D. McCARTHYDirector

Center for the Study of PhilanthropyThe Graduate Center, CUNY

A C A SE ST U DY I N T H RE E PARTS

buildingfinancialstrength andprogram

quality:a case on

grant makingto strengthen

communityfoundations

P A R T O N E

P A G E 1How to Use This Case Study

P A G E 1The Challenge

P A G E 2Origins of the CommunityFoundations Initiative

P A G E 3The Grant Maker’s PriorExperience

P A G E 4Learning the Field

P A G E 5Finding a Point of Interve n t i o n

P A G E 6Shaping the Program

P A G E 1 0Sample Study Questions for ThisCase

P A G E 1 2PART TWO:Using an RFP

P A G E 1 8PART THREE:Epilogue

This case study has been adapted from classic training materials used for many

years with new grant makers at the Ford Foundation. It is now part of the

GrantCraft series of publications and videos, which invite foundation

practitioners to join conversations and solve problems with their peers about

strategic and tactical issues in philanthropy.

You can download .pdf versions of GrantCraft publications from the project’s Web

site at http://www.grantcraft.org

You are welcome to excerpt, copy, or quote from GrantCraft material, with attri-

bution to the foundation and inclusion of the copyright.

© Copyright 2004 The Ford Foundation. This case was written by Ellen Arrick

and Marc Zegans in 1992, with revisions in 2003. All names are fictitious.

In short, this is an exercise meant to prompt reflection andimagination. It may be helpful in framing a group discussionor as the basis of a training exercise. (In fact, it was origi-nally written for that purpose.) But it can be just as useful ifread in private. It’s not a test — there are many possibleapproaches and solutions to the issues raised here. There areno “correct” ones unveiled at the end.

If you decide to use this case study with a group or in train-ing classes, we suggest giving participants plenty of time toread and think about the case, well before the discussion.Because the case offers an opportunity for readers to putthemselves in the place of another person, it may take sev-eral readings, or just some quiet time to think, before areader begins to imagine what she or he would do in thissituation. Circulating some open-ended study questions inadvance might help to jump-start a discussion, or highlightissues of special importance to the members of your group.We offer some possible questions at the end of this case.

While teaching by case method was made famous by theHarvard law and business schools, its origins go back tomedical education. Medical students presented with a livecase — say, a person manifesting particular symptoms —would be asked by their instructors to make a diagnosis andto recommend a course of treatment. This mode of teachingcontinues to dominate pedagogy in clinical medicine.

Meanwhile, case teaching as a pedagogical device hasspread widely in professional education.

So we offer this case in that spirit, as a learning exercise anda springboard for formulating ideas — but fortunately, with-out the life-or-death consequences that a medical casemight pose. Several groups have used this case in trainingsessions or group discussions at the Ford Foundation, and inthe process they arrived at different conclusions by differentmethods. Similarly, we encourage you to think of it not as away of learning from someone else’s experience, but as away of expanding your own.

The Challenge

Grant maker Sara Greene had just completed six months’work exploring the world of community foundations and wasnow ready to put forward a proposal — a multi-million dollargrants program for community foundation leadership. Greenebelieved that this initiative would both strengthen commu-nity foundations’ endowments and build their capacity to beeffective community catalysts and grant makers.1 Theprospect filled her with a mixture of excitement and trepida-tion.

Greene was excited because she felt that it would be possi-ble to do something that had a galvanizing impact on thefield. The initiative she envisioned was based on the then-novel premise that building a community foundation’s pro-gram capacity could help it to achieve asset developmentobjectives. At that time, to her knowledge, no other nationalfunder had seen the connection between asset developmentand programming effectiveness, and none had explored itsimplications in terms of a funding strategy.

Greene was anxious, however, because she knew that thetime had come to convert her concept into a specific requestfor proposals. In addition to creating a document that wouldexplain the competition to the field, she needed to report onher progress at an upcoming meeting of the foundation’s

CASE STUDY - BUILDING FINANCIAL STRENGTH AND PROGRAM QUALITY: PART ONE 1

How to Use This Case Study

The following pages describe a real episode

from the experience of one grant maker at

the Ford Foundation. Except for a few identi-

fying details, the circumstances presented

here actually arose, and the staff member

faced the same questions and choices that

this case study presents to you. But the case

isn’t meant as a history lesson; it doesn’t

supply all of the grant maker’s “answers.”

Those are for you to choose.

1 For more about conducting grant competitions or about making endowment grants, see guides at: www.grantcraft.org

board of trustees. As she sat down at her desk, Greene won-dered where to begin.

Community foundations (CFs) are philanthropic institutionsthat serve a designated geographic area, usually a city orcounty, but sometimes an entire state. Rather than originat-ing from a single bequest, CF endowments are open-ended;that is, raised by the foundation from a number of sources,typically wealthy individuals in the community. Becausecommunity foundations are almost always designated as“public charities” by the U.S. Internal Revenue Service, con-tributions to CFs are tax-deductible. Community foundationstypically conserve donor principal and use the income fromthat principal to make grants. Donors can make both unre-stricted gifts, which allow the community foundation discre-tion to select grantees, and restricted gifts that specify thedonor’s field of interest or even the individual grantees.

Origins of theCommunity FoundationsInitiative

As newly appointed director of her program area, Greenewas under the direct supervision of a foundation vice presi-dent, Jane Sherman. Sherman, who had begun the CF initia-tive before she was promoted, had developed a stronginterest in community foundations as a result of severalexperiences during the mid-1980s.

A critical event in shaping her interest was a review of foun-dation programs that regularly occurred every five years. Anoutside observer who was participating in the last reviewhad urged the foundation to consider establishing regionaloffices to make its presence felt more widely and to enhancethe quality of its local programming. In a related conversa-tion with Jane Sherman, the reviewer had also suggestedthat the foundation consider channeling some of its localsupport through community foundations.

Sherman had direct experience with CFs as well. She hadrecently helped to establish the Puerto Rico CommunityFoundation (PRCF), whose mission was both to serve as aconduit for philanthropic funds from mainland corporations

and foundations, and to attract resources from island donors.Sherman had also helped launch a teen parenting initiative,which Greene had inherited, in collaboration with a group ofcommunity foundations.

About halfway through that project, Sherman had realizedthat community foundations were drawn to the collaborationnot only by their desire to work on the teen pregnancyproblem, but also by the prestige of working with a largenational foundation. The community foundations felt thattheir own activities, and the community’s perception of theirvalue, were enhanced by having a nationally known foun-dation as a partner — a benefit they hoped would continue.The Ford Foundation, however, had been primarily con-cerned with project results, not with building ongoing rela-tionships with local funders. Toward the end of thecollaboration, one community foundation executive put theissue squarely on the table:

“We have spent all our time together talking about theprojects and what we’re learning from them. And wehaven’t spent enough time strategizing or talkingtogether about what more could come out of ourrelationship. ”

This view was reinforced at meetings that Sherman hadbegun to attend among a group of some of the largest com-munity foundations. At these meetings, community founda-tions had asked about the possibility of more “deals” withFord. It struck her that here was a system, a network, thatspoke the same language as the Ford Foundation and thathad the potential to reach a broad audience.

In Sherman’s view, CFs had compelling strengths asprospective partners. First, they appeared to know their owncommunities well. Second, they could respond to the needsof those communities with sensitivity. As she put it:

“Working through community foundations would be away of getting people around the country to know aboutus and how we did our work, so they could be a kind offilter and talent scout, a farm team system for us.”

Sherman had also noted that many of the small communityfoundations seemed to have unrealized potential. They were

2 CASE STUDY - BUILDING FINANCIAL STRENGTH AND PROGRAM QUALITY: PART ONE

good at making small grants to a variety of institutions, butthey tended toward conservative grant-making strategies,typically funding established institutions rather than new,experimental projects. In addition, their boards, which mostoften had the responsibility for selecting grantees, tended tobe homogeneous and did not reflect the diversity of thecommunities in which they were based. Moreover, commu-nity foundations usually lacked the staff and financialresources that would enable them to develop original andfocused programs.

Sherman believed that community foundations could play animportant leadership role in their communities and that Fordcould help them do so. In Sherman’s view, CFs could act asneutral conveners for different and sometimes conflictinginterests in a community; they could play a catalytic role byputting symbolic funds into controversial projects; andfinally, like the Ford Foundation, they could stress the impor-tance of diversity on the boards and staffs of organizationsthey funded.

Several of the Ford Foundation’s trustees were familiar withcommunity foundations in their own cities, and hadexpressed a general interest in the topic. Responding to theirinterest, in the spring of 1985 Sherman presented them witha proposal to develop a community foundation initiative.Sherman wanted a large enough block of funds to have asignificant impact on the field, and after canvassing col-leagues familiar with CFs, she requested an appropriation of$5 million over two years.

After obtaining approval for the idea, Sherman asked SaraGreene to develop an initiative whose purposes would be “toincrease the funding base of community foundations (partic-ularly with new, undesignated funds), to enhance the pro-

fessionalism of staff in community foundations, and to buildspecific funding partnerships between community founda-tions and the national foundation.”

Greene saw her new assignment as an open-ended initia-tive in which she would need to learn what she could aboutcommunity foundations, then develop a strategy appropriateto the Ford Foundation’s interests.

The Grant Maker’s PriorExperience

Greene had spent five years as a Ford Foundation programofficer developing programs on women’s issues, mostrecently managing a portfolio of grants in the field of welfareand teen pregnancy. At the end of this term she was pro-moted to program director. In this new capacity, theCommunity Foundations Initiative would represent about 25percent of her workload.

Apart from these experiences, the bulk of Greene’s back-ground lay outside of philanthropy. Before joining the FordFoundation she had been a professor of social work and hadnot been exposed to the workings of community foundations.But after arriving at the foundation, she had taken a leadrole on the teen pregnancy collaborative, and that gave hersome experience in working with community foundations. Asprogram officer for the project, Greene had used two nation-ally known intermediary organizations to channel funds toteen pregnancy projects in target communities. In turn, ineach of those communities, a community foundation identi-fied the grantees, funded the local programs, and publicizedthe initiative.

Greene had taken away three lessons from that experiencethat were relevant to her current assignment. First, she felt itimportant that Ford not be perceived as insensitive to localconcerns. Second, she felt that community foundations mustinteract directly with one another if they were to learn fromothers’ experiences. Third, she believed that relying onintermediaries to manage project operations would make itmore difficult for the Ford Foundation to build a close rela-tionship with the community foundations.


‘We haven't spentenough time talking

about what morecould come of our

relationship.’

Learning the Field

Greene’s first conversations about CFs were with her super-visor, Jane Sherman, and the program officer who hadworked with Sherman on the creation of the Puerto RicanCommunity Foundation. She then began to talk to peopleoutside the foundation. These included the leadership teamsof several large community foundations and the staff at theCouncil on Foundations (COF), the trade association for phi-lanthropies. At the council, she learned about the kinds ofsupport already available for community foundations, both atCOF and through other public and private organizations.

For example, the Charles Stewart Mott Foundation had set upa program to provide technical assistance and endowmentchallenge grants to small and emerging community founda-tions. The William and Flora Hewlett Foundation had pro-vided about $3.1 million in challenge grants to help createendowments at five community foundations in California. Onthe public side, the federal Department of Energy hadworked with three community foundations on energy con-servation projects, and the National Endowment for the Artshad used community foundations to channel funds to smallarts organizations.

Greene also learned that there were only a few large CFsand a lot of very small ones. Of the 204 community founda-tions that responded to a 1984 survey conducted by theCouncil on Foundations, only 13 had assets of more than $50million. In addition to these 13 large CFs, there were another27 that could be termed mid-sized, with assets of between$10 million and $50 million. There were about 63 small CFsin the $2 million to $10 million category. The approximately100 foundations with assets of less than $2 million wereessentially start-up operations.

The co u n cil estimated that the top 24 community founda-tions held approximately 80 percent of the $3 billion inassets held by CFs. Her early conversations with co u n ci lstaff and others familiar with the field co n vi n ced Greenethat community foundations with assets in excess of $50million would be less likely to need assistance from theFord Foundation than would the small, mid-sized, or start-up foundations.

Greene also discovered that community foundations repre-sented the fastest-gr o wing segment of philanthropy andwere a large and vocal co n s t i t u e n cy of the Council onFo u n d a t i o n s. She was struck by the degree to which COFstaff saw community foundations as the individualists of thefoundation world. She knew that the CFs lacked a strong tra-dition of co l l a boration, which might readily be explained bytheir distinct geographic servi ce areas; but co u n cil staff sawsomething more: a particular pride of independence that, inthe staffers’ vi e ws, had limited the field’s development.

From the leaders and staff of community foundations, Greeneheard both encouraging and frustrating stories. Communityfoundation members of the COF had organized a Committeeon Community Foundations to represent their interests in thewider organization, and to host workshops and seminars forCF staff and boards on such issues as fundraising, invest-ment strategies, and ethics. In spite of these efforts, commu-nity foundations felt underserved by the council, and poorlyunderstood by its other members.

Because the CFs were both fundraisers and grant makers,they felt that their needs differed from those of fully endowedand corporate philanthropies. Small community foundationsin particular found themselves in a “Catch-22” situation: Theyneeded to show that they were making grants in order toattract donors, but without donors they were unable to makemany gr a n t s. They felt that the COF needed to offer moretechnical assistance specific to their distinctive needs, andthey were co n ce rned because their influence in the co u n ci lwas not commensurate with their numbe r s.

The COF staff expert on community foundations had recentlyleft the council, and her responsibilities had been reassignedto other COF staff who lacked specific expertise. As a result,some CFs had begun to talk about withdrawing from thecouncil and forming a separate organization of their own.


The field had only a fewlarge players and an

army of smallones.

Through her conversations and research, Greene was form-ing a clearer picture of how a typical community foundationevolves: CFs usually are started by one enterprising individ-ual with an ambitious vision of what such an institutioncould do. The founder then typically pulls together a boardand applies for tax-exempt status. Often the only staff of thenew institution, for two or three years, would be a volunteeror a retired person working alone or even part-time — a fac-tor that would limit the new foundation’s ability to growquickly. Once it reached about $2 million in assets, theorganization could usually afford to hire one paid staff mem-ber. Community foundations typically use several differentsources to fund operating expenses. These sources includeadministrative fees on endowments, grants, and investmentincome. Thus, a CF’s capacity to pay for staff and other oper-ating expenses is a product of its fundraising abilities.

One expert, Sam Hitter — a consultant to another founda-tion’s initiative in support of CFs, and later head of a largecommunity foundation — thought that any city of at least250,000 people had a sufficient pool of wealthy donors tosupport a community foundation. Hitter also felt that “wealthattracts wealth,” and that assets of at least $5 million wereneeded to reach the critical mass that would establish credi-bility with the donor community and enable a communityfoundation to grow dramatically.

Other experts thought that to achieve such critical mass a CFneeded to be able to support two professional staff members— one to raise funds and one to make grants. These expertsthought that a CF needed to have at least $10 million inassets to get to the point where it could really take off.

Finding a Point ofIntervention: The LinkBetween Flexible Assetsand Program Quality

Several leaders of community foundations told Greene thatthe easiest resources to attract initially were restricted or“donor-advised” funds, which came with the condition thatthe donor play a role in deciding what kinds of grants would

be made. In Greene’s early conversations with COF staffmembers, they voiced the opinion that a high concentrationof donor-advised funds left community foundations too littleflexibility to take initiative in developing programming thatwas responsive to changing local needs.

Grant decisions at most community foundations weremade by their boards, often kn o wn as “distribution co m-m i t t e e s.” Boards were selected in one of two way s ,depending on the legal structure of the community foun-d a t i o n. Under the “trust” structure, board members wereappointed by designated representatives of important localinstitutions — say, by the mayor or the president of thelocal university. Under the “co r p o r a t e” structure, newboard members were identified by a nominating co m m i t-tee drawn from the current board of trustees. Board mem-bers under both structures tended to be wealthy membe r sof the co m m u n i t y. Not surprisingly, the boards were alsolargely male and white.

The grant-making style of small CFs’ boards typicallyinvolved annual grants to the local hospital, the symphony,or other key community organizations. They generally hadlittle or no experience with multi-year grant-making pro-grams in a defined issue area. From Greene’s perspective,CFs had an image problem: People in the foundations’ com-munities didn’t know who they were or what they did. Shefelt further that they were missing an important opportunityto exercise leadership on serious problems, such as childwelfare or youth unemployment. For example, they couldplay an important convening role, bringing public, private,and nonprofit players together to tackle a divisive localissue. But rather than filling this role, Greene concluded, CFsoften found themselves virtually invisible in their communi-ties, isolated geographically, and unfamiliar with what washappening nationally on a particular issue.

In her explorations, Greene had hoped to find more co m m u-nity foundations like the Pa cific Northwest Foundation, whichhad been a participant in the teen parenting co l l a bo r a t i v eGreene had led. With $32 million in assets and annual gr a n t sof $2.6 million, this CF was in the top 25 percent of thegroup, but Greene saw important attributes that went be y o n dasset size. For instance, the Pa cific Northwest Foundation hadd r a wn together an impressive political and funding co a l i t i o n


that was essential for gettingits teen fatherhood initiativeoff the gr o u n d. While thefoundation had been gr o w-ing quickly, its board reco g-nized that both program andasset development werevital to its effectiveness.Working with a $300,000 operating budget, this foundationwas able to hire two professional staff members who workedon fundraising and programming respectively. The foundationhad recently decided to add a second program staffer.

A more typical community foundation, Greene found, was theCuyahoga Community Foundation in the Cleveland area. This$8 million foundation was gr o wing rapidly, but almost half ofits funds were restricted. Its all-male, all-white board haddone little to make the foundation an active player in its co m-m u n i t y. The foundation, however, had an executive directorwho had be gun to take a look at community needs and hadsome ideas about how the foundation could play a useful rolein addressing the serious problem of youth unemployment.

Many brand-new community foundations faced start-upproblems like those of the Southern Cone CommunityFoundation, a $500,000 foundation serving a tri-city regionin the Southeast. It had been founded by a research scientistat a local pharmaceutical company who had won a Nobelprize and used the money to start the foundation. It had arelatively diverse board and a young executive director witha lot of energy but little fundraising experience. With anoperating budget of $43,000 a year, the executive directorwas struggling to raise money to pay her own salary and tomake a few grants. Most of the funds raised by SouthernCone thus far were restricted.

Greene’s interviews with the leaders of community founda-tions and others familiar with the field confirmed herimpression that CFs would welcome an initiative from theFord Foundation to help them build endowments. Yet someof the people she spoke with were concerned that Fordwould place too much emphasis on programming and paytoo little attention to the serious problem of asset develop-ment. On the other hand, several critical observers of CFs,including other foundation executives and COF staff, told

Greene that CFs were overlyfocused on fundraising —that some were just “devel-opment engines” with littleexpertise or interest in for-mulating good grant-makingprograms.

In Greene’s view, fundraising ability and programmingcapacity were linked issues. She reasoned that CFs would bebetter able to raise endowment funds when they demon-strated the capacity to develop and carry out good programs.Therefore, Greene decided that in addition to working on theCF funding base, the initiative would help CFs develop pro-grams that made a real difference in their communities —and thus build their reputations as worthwhile targets forcontributions.

It also seemed to Greene that the field of community founda-tions needed structure: a set of shared goals, a common lan-guage, and a set of standards to which community foundationswould agree to adhere. Finally, she thought that CFs as a fieldcould benefit from better data collection, and that such datacould be used to help educate the public and potential donorsa bout community foundations. She therefore decided that theinitiative should help the community foundation field be co m ebetter defined and strengthen its public image.

Shaping the Program

DE F I N I NG TH E PL AN

At the beginning of her investigations, Greene had thoughtabout just inviting a few promising CFs to submit proposals,but her briefing at the Council on Foundations suggested thatthis would be a mistake. Community foundations seemed tobe extremely sensitive to how they were treated by thelarger world of philanthropy. If significant resources were tobe distributed to just a few CFs, it would be best to distributethem through a competition. In Greene’s view, a competitionwould make the selection criteria clearer to the field andwould help to protect Ford against accusations of unfairness.


Skills were crucial –‘money alone was not

that important.’

By early November, Greene had the outlines of her initiativein mind. She planned to invite a group of CFs to respond to aRequest for Proposals (RFP). Those selected would beencouraged to take the lead in helping their communitiesaddress an important local problem. The initiative wouldmake funds available to the CFs for grant-making programsrelated to the target problem, and the community founda-tions would use the message of those programs and theimpact of the Ford grants as vehicles to leverage newsources of support for a permanent endowment fund. Theobjective would be to leave each CF at the end of the grantperiod with enough unrestricted funds to continue innovativegrant making in its chosen problem area. The initiativewould also leave CF staff more experienced in developingprograms.

As Greene explained it:

“We wanted community foundations to go through thewhole experience — you know, all the different skills:deciding what the topic is going to be, getting the com-munity constituency behind it, figuring out how to buildpolitical will, and actually designing a grant-making pro-gram and carrying it out. And we thought that if theycould be successful in one area, those skills would trans-late to a variety of other areas. We thought those skillswould be really central to the vitality of community foun-dations — that money alone was not going to be thatimportant.”

While Greene was confident of these choices, many featuresof the initiative remained undecided. These included:

Definition of the target group: Greene knew that the fundsshe had to work with were quite limited, compared to thesize of the field. (Although she and Jane Sherman hadapproached some potential funding partners to join with theFord Foundation, the initiative had not fit their grant-makinginterests.) Therefore she would have to develop a sharpfocus for her grant making.

Greene could envision a number of methods for defining thepool of potential applicants. She might target CFs by size, orthrough a formula that took into account the proportion of aCF’s assets that were discretionary. If she chose the second

option, it could allow mid-sized foundations with mostlyrestricted assets to be eligible alongside small foundations.Greene felt that the matter of discretionary assets and thesize of eligible institutions were important to whatever bal-ance she was going to strike between her two linked con-cerns: asset development and program development. If theprimary goal was going to be program development, thenmid-sized foundations with few discretionary assets couldbenefit as much from her initiative as small foundations, andthey might produce visible results more quickly. On the otherhand, if the goal were primarily to build assets, it might besimpler to work with a homogenous group of small CFs.Opinions among members of the group with whom she hadconsulted were divided.

Selection process: Greene had quickly decided on using acompetitive RFP process; but should Ford run the competitionitself, or use an intermediary? Should it make its ownchoices, perhaps aided by a board of advisers, or use aselection committee? From her observation of other competi-tions organized by the foundation, Greene knew that therewould be a tremendous amount of administrative workinvolved. An intermediary could probably save Greene timeby managing the details of the review, but that would dis-tance the Ford Foundation from the process. Greene alsoknew that making her own decisions would give her morecontrol, but such a hands-on approach might raise questionsabout fairness.

Program goals: Greene also faced a major decision aboutwhether to select a problem area for all applicants to workon, or to allow them to decide for themselves. Greene didn’twant to steer CFs too much, and she didn’t want to increasetheir risks by insisting that they take on an unpopular topic.On the other hand, she wanted the community foundationinitiative to fit in with Ford’s interests. In addition, havingone common problem area could help the Ford Foundationlearn something from the various CF efforts, and it mighthelp the foundation to provide better assistance with a com-mon team of expert advisers. A single problem area couldalso make it easier for CFs to share information about thefield with one another.

Fundraising requirements and grant terms: Greene knewthat CFs would need to raise significant amounts of local


money if they were to produce an unrestricted endowmentsufficient to continue the new grant program and pay foradditional professional staff. If it were to fulfill both itsendowment-building and programming goals, the Ford grantwould need to have significant impact on fundraising, whileenabling the CF to begin to make grants right away.

Greene estimated that a community foundation would needat least $100,000 per year to set up a meaningful grant-making program and bring on a staff person or a consultantwith specialized expertise in the chosen problem area. Afterpaying for staff and office expenses, a CF would have about$50,000 left to make grants. Greene thought that thisamount would enable CFs to begin to make grants on aslightly larger scale than they had been doing. It would alsobe large enough to give the CF a seat at the table with oth-ers working on the target problem area.

The grant term also needed definition. It could take a longtime to have a meaningful effect on a problem area. ByGreene’s estimate it would take at least five years to developand implement a program. On the other hand, fundraisingcampaigns needed a sense of urgency and momentum andhad to be completed within a couple of years.

Diversity goals: Greene began to think about how muchemphasis the selection process should give to diversity.Some CFs were worried about intrusiveness on the diversityissue — they didn’t want an outside institution interferingwith their board structures. By contrast, other CFs wereinterested in broadening their boards, and were looking forhelp from the foundation to do it. How could she strike anappropriate balance? Several options appeared plausible.These included:

n Attaching a statement of the foundation’s philosophy tothe RFP and requesting diversity information fromapplicants

n Giving diversity statistics weight in the selectionprocess

n Providing technical assistance to CFs on managing theboard selection process

Technical assistance and support to the field: Anotherconsideration for Greene was how to structure technicalassistance to the CFs that won the competition. In the teenparenting collaborative, Greene had found herself investingan enormous amount of time in one-on-one contact withcommunity foundations, especially in the planning stage ofthe project. While it seemed appropriate to her for founda-tion staff to help participants in this way, she hoped to finda different mechanism to provide this assistance to the CFsin the new initiative. Greene was also concerned about howto provide technical assistance to foundations that were atdifferent stages of organizational development. If shedecided to work with both mid-sized and small foundations,it could be difficult to treat all of the foundations as a cohort.

Greene also began to think about the other kinds of supportthat the initiative could provide to CFs beyond the competi-tion. She wanted to increase the public’s recognition of thefield, so that community foundations would become a house-hold word, like the United Way. And she felt that CFs neededa forum for communicating with one another. But communityfoundations had not yet decided — collectively or, in manycases, even individually — how to accomplish these objec-tives.

In making her choices, she needed to consider how her ini-tiative would relate to the Council on Foundations’Committee on Community Foundations. Although the councilwas not very experienced at running projects, it was underpressure from the community foundation world to do more.In response, the Committee on Community Foundations hadbegun to develop a national agenda aimed at increasing thecouncil’s current services for CFs and raising donor and pub-


How much control doesa grant maker exert over

grantees’ choices?

lic awareness of CFs. Several other national funders hadexpressed interest in supporting this effort.

B U I L D I NG S U PPO RT

In addition to sharing her ideas and findings with seniormanagement at her own foundation, Greene wanted to testher working assumptions with a larger audience in the field.In order to expand the reach of her inquiry, she hired a con-sultant, George Field, to help her in this task. Field had beenthe head of a $35 million community foundation in theMidwest, and was at present the director of a corporatefoundation. For Greene, he would serve not just as anotherpair of ears, but as a source of credibility. Field would beable to generate political support for Greene’s plans in theCF world. Field also filled another important role for Greene.He could be a colleague — someone with knowledge whoseopinion she trusted, and who could provide emotional sup-port in a new venture.

Over the next two months, Greene and Field conductedinterviews with 23 experts on community foundations,including directors of large, mid-sized, and small CFs; formerdirectors; and foundation executives who had funded otherCF programs. They also attended a meeting about CFs at theCouncil on Foundations, in which they sketched the outlinesof a plan for the council to provide technical assistance tothe field of community foundations. The people they spokewith responded positively to the basic concept and offered avariety of ideas about how it should be shaped. This is asampling of the advice they received:

n Don’t be too prescriptive about the program, but give abit of direction.

n Have incentives for raising matching contributionsquickly.

n Work with CFs that are already involved in activefundraising, so they’re not starting from scratch.

n Pick a field of interest or a problem for CFs to work on.

n Make board diversity one of the selection criteria, butdon’t be heavy-handed. Keep the match formula sim-ple and flexible.

n Keep the match formula simple and flexible.

n Boards need to be wealthy to help with fundraising;they need to represent the community, not reflect it.

n Get the staff of the CF grantees together in a group fre-quently. The key to success will be the capacity of CFstaff.

n Include both small CFs and mid-sized ones that needrevitalization.

n Advisory committees are inefficient.

n Consider grants of varying amounts.

As they canvassed the field, Greene and Field spoke aboutprogram development with a number of potential candidatesfor the competition. Some already had ideas about whatproblem area they would like to address through their grantmaking, if resources from the Ford Foundation were avail-able. Many more, however, were preoccupied with the needto raise assets. Greene and Field did not experience greatresistance, however, to the idea of linking asset buildingwith program development.

MOV I N G AH E AD

Greene was confident that she understood the major issuesin the field and that she could craft a viable initiative; butnow it was time to make her case. As she sat down to com-pose her thoughts, she wondered what specific elements sheshould include in her RFP, and what she should say in herreport to the trustees.


Sample Study Questions for This Case

In preparation for discussing this case, try answering the following questions and compare your responses to those developed by your

study group partners.

1. What are the underlying goals of the Community Foundations Initiative — for individual community foundations, for the field, and for

the foundation?

2. What challenges could you imagine arising from the RFP as a strategy and how would you address them?

3. How would you integrate the advice that Sara Greene and her consultant received into the RFP’s applicant requirements?

4. If Greene did not use an RFP, how else might she have tested her hypothesis that there is an important link between asset building

and program development for community foundations?



A C A S E ST U DY I N T H R E E PARTS


quality:a case on



P A R T T W O

P A G E 1 2Using an RFP

P A G E 1 3Managing theCompetition

P A G E 1 4The Winners: ThreeExamples

P A G E 1 5Appraising Round One

P A G E 1 6Participant Views

P A G E 1 6Round Two

You can download .pdf versions of GrantCraft publications from

the project’s Web site at http://www.grantcraft.org

© Copyright 2004 The Ford Foundation.

In the spring of 1986, Sara Greene was ready to present herplans for a community foundations (CF) initiative to the foun-dation’s board of trustees. Her initiative would have twocomponents. The first and largest would consist of issuing aRequest for Proposals (RFP) to identify eight communityfoundations which would each receive $500,000 over fiveyears. The second component would be a $500,000 grant tothe National Agenda for Community Foundations, a specialproject of the Committee on Community Foundations of theCouncil on Foundations. The project would collect data aboutthe field, provide consulting services to community founda-tions, conduct training programs about grant making, anddevelop a public information campaign.

Greene had decided that to be eligible to apply for the$500,000 grants, community foundations would need tohave the following characteristics:

n Permanent assets of between $2 million and $10million. Using a simple formula based on asset sizewas, in Greene’s view, the best approach to definingthe candidate pool. This limit would give Greene amanageable number of candidates — between 60 and70, according to a 1984 survey of community founda-tions conducted by the Council on Foundations.Although setting the upper limit at $10 million wouldeliminate some good candidates with a high percent-age of restricted funds, Greene decided that it wouldbe easiest to build a program around and provide tech-nical assistance to a relatively homogeneous group offoundations at a similar stage in their development.She felt that at $10 million, a community foundationwould be operating at a scale where it no longerneeded additional capacity-building resources. Shechose the $2 million lower limit because foundationsbelow that size had difficulty paying for professionalstaff and therefore would find it nearly impossible todevelop an active style of grant making.

n Staffed by at least one full-time professional. In herexploration phase, Greene had found that having apaid professional staff person was a prerequisite for acommunity foundation’s growth.

n Located in a metropolitan area of at least 250,000.Greene relied on the rule-of-thumb developed by com-

munity-foundation expert Sam Hitter, who estimatedthat the wealth needed to support a CF could only befound in communities of at least a certain size.

n Member of the Council on Foundations. Greenewanted to reinforce the connection between the com-munity-foundation world and the Council onFoundations, and therefore wanted to make sure thatCFs in the competition were members.

In their applications, the CFs would have to describe a sig-nificant community problem that they proposed to work on,and a plan for how they would use the Ford grant to addressit. The identification of the problem would be left up to thecommunity foundation, although in her RFP, Greeneinformed applicants that in evaluating the application, thesignificance of the problem would be gauged by “the num-bers and kinds of people affected; the seriousness, perva-siveness, or intractability of the problem.”

The grant would have a two-to-one matching requirement.Applicants would have to specify their plans for raising $1million in new endowment funds — either in unrestrictedfunds or funds with a broadly defined field of interest. Fundswould have to be pledged within two years and collectedwithin five. In the meantime, the first $100,000 of the$500,000 grant would be released to the community foun-dation, and could be used for grant making and administra-tive expenses in the selected program area. During the firsttwo years, Ford would release one dollar of its remaininggrant for every two dollars in new endowment funds thatwere raised. However, the Ford grant was intended to bespent in annual amounts of $100,000 over the course of fiveyears. The community foundation would also have an optionto place up to $50,000 of the Ford grant per year intoendowment, if it raised substitute funds for its program fromlocal donors.

Greene used the following criteria to select the participatingCFs:

n Problem definition and strategic plan: The problemselected would have to be significant, and the commu-nity foundation would have to demonstrate that it hadboth the opportunity to play an important role and acomparative advantage in addressing it. In addition,

Using an RFP

12 CASE STUDY - BUILDING FINANCIAL STRENGTH AND PROGRAM QUALITY: PART TWO

CASE STUDY - BUILDING FINANCIAL STRENGTH AND PROGRAM QUALITY: PART TWO 13

the foundation would look for a grant-making plan thatcombined a preventive, policy-oriented perspectivewith direct service provision.

n Leadership role of CF: The foundation would considerthe variety and quality of activities in addition to grantmaking that the CF would propose to undertake. Thesecould include bringing diverse constituents together,stimulating dialogue between parties with conflictingpoints of view, and encouraging collaboration withother private and public funders.

n Fundraising plans: The community foundation wouldhave to produce a specific plan to raise the matchingendowment funds within two years and show that thisplan fit within the CF’s overall development plan.

n Staff and bo a rd capacity: Both board and staff wouldh ave to show the capacity and commitment to carry outthe programming and fundraising components of thep r o j e c t.

n Staff and board diversity and plans for change:Applicants were given a copy of the foundation’s policyon diversity and asked to supply diversity statistics fortheir board and staff. In her evaluation of the applicants,Greene looked not only at the current diversity profile ofeach CF, but also at how it proposed to include co m m u-nity input and respond to community interest in its proj-e c t s.

n Geographic distribution: Because the communityfoundations initiative was intended to help the FordFoundation broaden its geographic reach, Greenewanted to make sure that competition winners werewell distributed across the country.

Managing theCompetition

Having decided to make grants through a competition,Greene recognized the need to come up with a way to han-dle the large number of applications she expected — up to

60 — and steer them through the selection process. WhileGreene planned to make some of the site visits herself, shedecided that a group of advisers would help her review theapplications, make site visits, and give her general guidanceabout the initiative. Based on their review, the adviserswould recommend the competition winners, although thefoundation would have the final approval. The group ofadvisers Greene assembled included both current and formerdirectors of large community foundations and several execu-tives from other foundations. She also included a FordFoundation program officer who was familiar with commu-nity foundations, and the consultant she had hired earlier,George Field.

To handle the substantial load of administrative detail asso-ciated with the competition and the ongoing service needsof the grantees, she decided to hire a project manager. Thisindividual could organize conferences, provide technicalassistance directly or broker it through others, monitor theCF projects, and manage an evaluation. For the project man-ager assignment, Greene hired an experienced philanthropicconsultant, Lupe Terrado, who had previously managed aregional association of grant makers. Terrado would behoused at a nonprofit management organization, whichwould provide her with an organizational base.

In the summer of 1986, Greene sent her RFP to all 300 ofthe community foundations identified by the Council onFoundations. Since she did not want to omit any who mightmeet the guidelines, she decided that it was important togive them all the opportunity to apply. In addition, shehoped that the ideas and values embodied in the RFP wouldinfluence the field more broadly. The RFP required that theapplicant spell out a detailed five-year program plan and atwo-year fundraising campaign. Finalists would host a two-day site visit for two members of the advisers group.

Greene received 28 applications. She and members of hergroup of advisers conducted site visits to 12 communityfoundations. By December, with the assistance of Terrado,Field, and the other advisers, she had identified the eightCFs who would receive the $500,000 grants. These werelocated in the South, the West, the Midwest, and theNortheast, and ranged in size from just under $4 million tojust over $8 million in assets. Although community founda-tions with as little as $2 million in assets had applied, these

appeared to have the weakest program plans. Of the eightwho ultimately won the competition, four had previouslybeen identified by Greene and Field during the explorationphase of the initiative. As she recalled:

“It actually was not that hard to make the selection of thewinners, but there was a second tier that clearly wasn’tas well positioned as that first tier, but had somethinggood going. Had a good development plan, just couldnever get it off the ground, programmatically, or viceversa.”

Once the competition was underway, Greene began to thinkabout how to structure an evaluation. She wanted the evalu-ation to serve two goals. The first was to provide feedback tothe foundation about the success of the initiative in helpingCFs to develop assets, programs, and community leadership.The second was to provide information about effectivestrategies to the broader field. With the help of Terrado, sheselected a small nonprofit evaluation consulting firm to col-lect data about the competition winners through regular sitevisits, standardized questionnaires, and attendance at theannual meetings of the competition winners. The informa-tion would be disseminated to the larger body of communityfoundations through a series of published reports.

The Wi n n e r s :Three Examples

1. Among the competition winners was the SouthwestCommunity Foundation, a $5 million foundation which haddoubled in size in the past two years. Despite a service areawith a high proportion of minority residents, only one of its26 board members was a minority, and only 4 memberswere female. However, the Southwest CommunityFoundation had established a distribution committee to guidegrant-making decisions and 3 of its 11 members wereminorities. The executive director, the foundation’s sole pro-fessional staff person, had previously directed a corporatefoundation and had a long track record of public service.

They proposed to use the grant to tackle the problem of chil-dren at risk for mental illness. What appealed to Greeneabout this program was that the Southwest Community

Foundation was proposing both to support early interventionstrategies to reduce the number of children at risk and to tryto work with the state social service system to improve serv-ices to these children. The new unrestricted funds, whichthey would raise, would be used to set up a children’s fund.The Southwest Community Foundation also proposed toaddress the need for more diversity in its programming byestablishing a community advisory group.

2. Another competition winner was the Midwest CommunityFoundation. It had been started as a spin off of United Way,but the board had recently voted to make it an independententity. With $6 million in assets and pledges of $4 millionmore, this foundation seemed to be well on its way toachieving critical mass. Unlike many CFs of this size, theMidwest Community Foundation was able to support threeprofessional staff people. Its board of 39 was dominated bywhite males, but also included 7 minorities and 7 women.Prior to assuming the leadership of the Midwest CommunityFoundation, its executive director had been a senior man-ager with a $130 million community foundation in a neigh-boring state.

This foundation had selected a difficult and pressing prob-lem: the reduction of substance abuse within its sevencounty service area. Greene was impressed with its ambi-tious plan of action to increase the emphasis given to pre-vention activities and to strengthen regional collaborationamong the diverse groups working on the problem.According to its proposal, some of the specific activities itproposed to undertake included a grants competition, a pub-lic awareness and media campaign, an informationexchange, regional policy proposals, and data collection andevaluation. In order to obtain broader community input intoits activities, they proposed to create a program advisorycommittee.

3. A third competition winner was the Southern CountyCommunity Foundation. A bright and articulate former countycommissioner had recently assumed the leadership of this $4million foundation. This foundation had the prospect of amajor contribution from a local corporation and projectedthat it could raise over $7 million in unrestricted funds overfive years. Its board of 21 had only two minorities and twowomen, although it planned to fill upcoming board vacancieswith women and minorities.


CASE STUDY - BUILDING FINANCIAL STRENGTH AND PROGRAM QUALITY: PART TWO 15

Located in a metropolitan area with a large and diverse setof ethnic communities, the Southern County CommunityFoundation had identified the problem of cultural alienationas its program focus. Greene was intrigued by the premise itput forward: that “the pervasive feeling of cultural alienationand lack of effective mechanisms for building a cohesivecommunity” had resulted in a community without a commonoutlook and helped to perpetuate racial stereotyping anddiscrimination. They proposed to support high-visibility mul-ticultural programs. For example, one project would link dis-advantaged teenagers who were interested in developingsmall businesses with young professionals from the county’svarious ethnic and cultural communities.

Appraising Round One

Looking back on the first round of competition, Greeneassessed its successes and shortcomings. As far as buildingthe financial strength of the community foundations, all butone of the eight met their fundraising targets without diffi-culty. The eighth met the match in time but failed to sustainits fundraising momentum. Four years later, the communityfoundations had, on average, more than doubled in size.They added an average of $4 million in unrestricted funds totheir endowments, meaning that most had reached the“critical mass” needed to attract significant additional sup-port. The fundraising success of the first round winners hadsuggested to Greene that community foundations did notneed to be in metropolitan areas of 250,000 in order to raisemoney. In addition, she observed:

“If the competition was successful on the asset develop-ment side. It had just the right balance of pressure andhelp, and with one exception, all of the community foun-dations in that first round have sufficient expertise andcapacity to raise money.”

However, it was clear to Greene that even at $15 million in assets, a community foundation might still have only $2million in unrestricted funds. It occurred to her that she mightneed to revise her initial upper eligibility limit of $10 millionin assets.

As far as building program quality, the results were lessclear. Greene was disappointed that the programs developedby the eight winners were initially weak, although she wasnot surprised. For most, it was their first attempt at puttingtogether a five-year program plan, and, in general, the plansreflected that lack of experience. The plans were either notwell spelled out or they proved to be unrealistic. However,over the course of the five years, she and Terrado were ableto help them strengthen their programs. Observes Greene:

“In the beginning I think we weren’t appreciative enoughof just how hard it is to do good programming and whatit would take for them to bring their boards along — notjust the director, but the board. They needed more laborintensive technical assistance on program development.”

A revealing symptom of this problem was that several ofthe community foundations were unable to spend theirgrant dollars in the first year. As project manager LupeTerrado explained:

“They needed to set up the infrastructure: board develop-ment, more office space, changes in investment policies,advisory groups. It was a lot to do the first year and thecommunity foundations had only one or two people to doit all. They’re really mom and pop entities, and it washard for them to mount a program with a public image.”

The first round also taught Greene that the role of the CF’sexecutive director was critical. Where there was a charis-matic person with creative ideas and a vision of what theCF’s role could be, it was successful at filling its leadershipgoals. About half had such an executive director. The dangerwas that when an executive director left, as happened atone participating community foundation, the other compo-nents of the program were not sufficient to compensate forthe loss. On the diversity front, the first round participantshad also made considerable progress, although it had takena long time and a lot of different strategies. Terrado ranworkshops on the diversity issue at every meeting sheorganized for them. The advisory committees that thesefoundations established to gather community input turnedout to be a good testing ground for new board members.


Looking back on the other component of her initiative, sup-port for the National Agenda for Community Foundations,Greene considered its accomplishments and shortcomings.The public education efforts of the project had met with lim-ited success: It had not been realistic to expect that commu-nity foundations could become as well known as the UnitedWay. But Greene was hopeful that this aspect of the projectwould eventually be successful with a more targeted educa-tion effort aimed at tax lawyers and financial planners.

On the other hand, Greene was satisfied that the NationalAgenda project had reduced the isolation of community foun-dations and helped to advance the field. It had brought manyCFs together in working groups to share common interestsand had produced useful materials on community foundationm a n a g e m e n t. Although an initial goal of the project had be e nto produce a common set of standards for CF operations, thiswas set aside because many felt it might inhibit their entre-preneurial styles. Nonetheless, Greene believed that in theirrelationship with the Council on Foundations and in their ownannual co n f e r e n ce, community foundations were now a moreprofessional and effective group of institutions.

Participant Views

Overall, the participants thought that the initiative had pre-sented them with a tremendous opportunity. The competitionhad given them a chance to mobilize the energy of theirboards and get them more interested in programming, and ithad put them on a sustained growth track. Some of the firstround participants shared the following observations:

“Our participation in the initiative was a dramatic turn-around for us. It gave us instant credibility with donors.”

“The hard part was fundraising. We had traditionallywaited for people to pass on and leave us something. Wehad never been in the fundraising business before, andthe board was loathe to get into it. We would be in com-petition with the nonprofits we fund.”

Round Two

Greene had assumed from the beginning that there wouldbe a second round of competition. As she explained:

“The field is so large that if you just work with eight, it’s adrop in the bucket. And if you just do it once, you’vetaken the cream of the crop at that size. You want to beable to demonstrate more depth, that the model actuallyworks with a wider variety. You learn more by havingmore local adaptations.”

She wanted the second round to deepen the foundation’sexperience and enable it to demonstrate its model withgreater credibility. Already the experiences of the initiativehad attracted a new funding partner, the MacArthurFoundation. The $2 million in additional support it providedwould enable Greene to consider broadening the competi-tion’s scope in the second round.

But the competition itself had been problematic for some ofthe weaker applicants. In order to participate, communityfoundations had to persuade other local institutions to joinwith them to work on a project, prepare their own boards tofundraise, and host a two-day site review for the initiative’sgroup of advisers. Greene had asked the project evaluator tointerview some of the non-winning applicants about theirexperience with the competition. She learned that after hav-ing invested so much time and energy, it became a publicrelations problem for them when they failed to win a grant.Some who did not make the final cut wanted to know why.Observed Greene:

“We needed to be a little more sensitive to the risks com-munity foundations take when they declare themselvespublicly and say, We’re going to try for this kind of grant.Word gets out, and then if they don’t get the grant, whatdoes that do to their fundraising?”

As she began to design a second round of competition,Greene needed to take her findings from the first round intoconsideration.


A C A S E ST U DY I N T H R E E PA RTS


quality:a case on



P A R T T H R E E

Epilogue

You can download .pdf versions of GrantCraft publications from

the project’s Web site at http://www.grantcraft.org

© Copyright 2004 The Ford Foundation.

In the second round of the Community Foundations Initiative,Greene sought to address the public relations problems ofnon-winning applicants and to take advantage of the addi-tional resources provided by the MacArthur Foundation tobroaden the reach of the program. To do this, she estab-lished a second tier of smaller grants for community founda-tions that showed some potential for growth, but wouldotherwise be unlikely to survive the final cut of the competi-tion. All of the applicants who proceeded as far as a sitevisit, as well as several other applicants, would receivegrants of $20,000 to $250,000, to support staff, program-ming, or travel to COF meetings or to visit other communityfoundations. Grants of $150,000 or over would have to bematched. In order to make the selection process as transpar-ent as possible, the criteria that Greene and her adviserswould use to evaluate the applications was included in theRFP, with points attached to each criterion. Any CF thatwasn’t satisfied with the outcome of the competition couldask to see exactly how it had scored in the review process.In the second round, Greene also built in more time for theconsultant she had hired earlier as a project manager, LupeTerrado, to work with the winners. In particular, Terradoneeded to pay careful attention to building board capacityand leadership. As she commented later:

“I wish we had spent more time designing the technicalassistance in the first round. The people in the first roundhad real depth; they really knew what they were doingand didn’t think they needed help. It took a year to estab-lish my credibility, to figure out how to present the techni-cal assistance to them so they would value it.”

Greene modified the eligibility criteria somewhat for the sec-ond round of the competition. Recognizing that even at $10million in assets, community foundations could still benefitfrom the initiative, Greene raised the upper limit on assetsize to $13 million. She also raised the lower limit on assetsize from $2 million to $3 million, because she had foundthat CFs below that size had difficulty developing a program

focus. Since raising the lower limit on asset size wouldreduce the number of eligible applicants, Greene decided toexpand the applicant pool’s geographic boundaries by mak-ing statewide and rural CFs eligible.

In the second round there were 24 applicants, and Greene’sgroup of advisers made site visits to 13. Of all those whoapplied, five received no grant award, and nine received thesmaller grants. Ten were chosen to receive the $500,000grants, six supported by the Ford Foundation and four by itsfunding partner. The ten who won the large grants rangedin size from $3.1 million to $8.5 million in assets and servedboth urban and rural areas. Many of them had chosen todevelop programs focusing on the problems of children andteenagers at risk, one had decided to focus on improvingregional cooperation, and one planned to work on housingand neighborhood services.

Not long after the initiative got underway, other programs atthe Ford Foundation began to work with individual commu-nity foundations as partners. For example, one of the win-ners from the first round was funded through anotherportfolio to undertake a water project for low income com-munities in its service area. The Southern County CommunityFoundation received support to become a funding and tech-nical assistance intermediary for the Ford Foundation’s com-munity development grantees in Southern County. By 1992,five of the original eight and a number of other larger com-munity foundations had become partners with the FordFoundation on other topics such as AIDS, community devel-opment and child care.

Epilogue

18 CASE STUDY - BUILDING FINANCIAL STRENGTH AND PROGRAM QUALITY: PART THREE

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