a new foundation for a new millennium

The foundation of the future will differ signifi-cantly from the prototype of today, according to bothinformal data collection and formal research under-taken by the Council on Foundations.

1A new foundation for a newmillennium

Dorothy S. Ridings

SOMEONE WISE ONCE SAID that the only certain thing about thefuture is that it is not here yet.

True enough. But forecasting what the future is likely to bringis a vital exercise for almost any enterprise, including any founda-tion. And strategic planning based on that forecasting is clearly notjust a trendy process; it is simply smart management and prudentstewardship.

For the Council on Foundations, forecasting and strategic plan-ning are essential. Like many of our 1,750 member foundations andcorporate giving programs, the Council has been engaged in devel-oping a strategic plan that will serve us through the year 2004, andit has been a fascinating learning process. Much of it is necessarilybased on assumptions about the nature of organized philanthropyin the new century, assumptions themselves based on both projec-tions of hard data and educated opinions.

I was able to get an unintentional head start on harvesting thoseassumptions by simply arriving at the Council in 1996, without

NEW DIRECTIONS FOR PHILANTHROPIC FUNDRAISING, NO. 23, SPRING 1999 © JOSSEY-BASS PUBLISHERS

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much involvement in the broader field of philanthropy beyondserving on two foundation boards and as an adviser or consultantto several others. It was clear to me that the Council’s new presi-dent needed to know a whole lot more, firsthand, and the way toget that knowledge was to travel to meet our members, ask ques-tions, and listen.

For two years I spent more than half of my time on the road,collecting information and ideas. Among the things I wanted tolearn as I visited our members was where the practitioners in orga-nized philanthropy think we are headed, as well as where we wantto be headed—to get a handle on the foundation of the future envi-sioned by the field of philanthropy itself.

Trends in philanthropyAlmost universally, I heard six trends mentioned:

• The field will continue its current explosion in numbers andassets.

• Grantmaking will become much more targeted.• The field will become more professional.• Accountability will be more important than ever.• Competition will be ratcheted up.• Diversity is the watchword of the future.

None of these even remotely constitutes a revelation, an “ah-ha.”But taken together, they portend dramatic changes for all of orga-nized philanthropy.

• First, there is the issue of growth.This is a particularly important issue for the Council as a mem-

bership organization. I heard everywhere on my travels that thefield would grow enormously, and nothing I have heard since thenputs a damper on that prediction for the near future. Certain leg-islative and regulatory actions, such as the October 1998 passageof permanent status for the tax provision concerning gifts of appre-

6 THE CHANGING WORLD OF FOUNDATION FUNDRAISING

ciated property to private foundations, will only accelerate thetrend, since many new private foundations are formed with gifts ofappreciated stock.1

In fact, almost half of the 12,000 largest foundations in theUnited States have been created since 1980, according to the Foun-dation Center, and half of the 500-plus community foundationswere established in the last decade. Council membership also isgrowing at a rate previously unequaled; by the end of October,about 260 foundations and corporate grantmakers had joined in1998, compared with 158 new members in all of 1997—itself arecord year.

Growth is continuing explosively in terms of assets as well.According to the Foundation Center, asset growth was strong dur-ing most of the twentieth century, with annual percentage growthin assets of the larger independent foundations hitting a high of 18percent in 1996, the latest year for which complete data is avail-able.2 A continued strong stock market and the tax provision forgifts of appreciated stock to private foundations will undoubtedlyencourage still greater asset growth; an informal Council survey in1997 showed that the tax provision had clear and strong impact onboth new foundation formation and additional gifts to existingfoundations during the ten years the provision was in effect priorto its sunset in 1994.

The much-touted intergenerational transfer of wealth, in whichan expected $10 trillion or more will change hands in the nexttwenty-five years from one generation to another, is another pre-dictor of philanthropic growth. Many in organized philanthropyare working hard to see that some portion of those trillions goesinto foundation giving.

• Targeted grantmaking is already on the rise, and all indications arethat the trend will accelerate in the coming years.

Women’s funds. Native American funds. Environmental funds.These and other specific interests are targets of funds increasinglybeing formed across the country, and practitioners of philanthropyexpect that to continue. Annual reports are providing anecdotal evi-dence that today’s new crop of donors, in particular, believe they

7A NEW FOUNDATION FOR A NEW MILLENNIUM

can make a greater impact on a societal problem by “bundling”their dollars and focusing more narrowly on the avenues towardsolutions.

Perhaps even more telling is the trend toward more targetedgrantmaking in terms of the personal involvement of donors. Theso-called new entrepreneurs of the baby-boom generation areinterested in greater hands-on engagement with their grant recip-ients, a trend that is especially noteworthy to the charitable com-munity that seeks volunteers along with dollars.

• Professionalization of philanthropy is seen as necessary by some—and problematic by a few.

Many different things can be meant by professionalization. Mostof those who are promoting the idea talk about increased trainingfor staff and trustees. Some are looking down the road at standardsfor staff certification.

The Council on Foundations has seen a marked rise in atten-dance at conferences and training opportunities, a rise that farexceeds the estimated 3.6 percent growth of the foundation field,the growth in our own membership, and growth in numbers of staffand trustees. There appears to be a real hunger for learning howto do things better, a sentiment we are hearing from conferenceevaluations and member surveys.

Further evidence of the trend comes from the growth andheightened activity of affinity groups, especially those of profes-sional groupings such as the community foundations’ associationsfor program officers, development workers, and financial staff. Thenumber of affinity groups recognized by the Council on Founda-tions grew to thirty-six in 1998, with some of the most recentlyorganized ones in the areas of grant evaluation, technology, andorganizational effectiveness as opposed to the more traditional pro-grammatic concerns such as education, health, and the arts.

• The emphasis on accountability springs from both necessity anddesire.

If the entire nonprofit field has an Achilles heel, it clearly isaccountability. Whatever the reality, numerous public opinion sur-veys show that the public believes this to be charities’ weak spot.


Grantmakers, too, are inescapably concerned (even though Coun-cil research shows foundations’ accountability ratings to be high),since the health and public approval of the organizations they fundare essential elements of effective philanthropy.

Recent legislative attempts at both federal and state levels aimedat forcing greater accountability show the dangers of not heedingthis concern. The charitable sector has been largely successful atwarding off egregious attacks that, rather than enhancing account-ability, would hamstring important charitable activities such asadvocating or even just participating in policymaking discussionswith lawmakers. Grantmakers have confronted fewer direct attacks,although here too the threat is real, such as in current legislativeattempts to restrict activities of corporate grantmakers.3

So the grantmaking world sees the real necessity for greateremphasis on accountability, as a way of strengthening public trustand fending off greater governmental oversight. Even more heart-ening, grantmakers are welcoming greater accountability, seeing itas an integral part of what philanthropy is all about.

Interestingly, Council research shows that Americans over-whelmingly believe foundations are accountable to the public, farmore than to their boards, to regulatory authorities, or any otherentity.

• Competition is not exclusive to the for-profit sector.It never was. But recent times have accelerated attention to com-

petitive pressures. Much has been written of the growing directcompetition in the charitable world, as lines become blurred amongthe governmental, public, and private sectors. But in the grant-making part of the nonprofit sector competition is heightened aswell, most notably among community foundations. And few thinkthe trend will do anything other than grow stronger.

A strong economy and increasing numbers of discretionary dol-lars fueled the latest wave of competition, in which various com-mercial enterprises—primarily financial management companies,brokerage firms, banks, and the like—have formed divisions to com-pete for charitable funds from individual donors. Commercial donor-directed funds are a direct challenge to community foundations in


particular, and a war of sorts broke out in the late 1990s that willprobably continue into the future, absent government intervention.

After some initial hand-wringing, community foundations gotsmart and began emphasizing their distinct competencies, thoseadvantages that set them apart from the commercial firms.Stepped-up marketing has begun and will continue, based on thedistinct features that community foundations can offer to makethem the attractive choice for donors as vehicles for giving.

This story is far from over. The commercial donor-directedfunds face a clear and appropriate challenge by the Internal Rev-enue Service as to whether they meet the requirements of the law,notably whether donors have too much control over how theirgifts are directed and whether there is any “private benefit” (a realno-no) to such gifts. In the fall of 1998, a key staff member of theHouse Ways and Means Committee was suggesting that one solu-tion might be to change the law so that private foundation ruleswould apply to donor-directed, or donor-advised, funds. The pre-vailing view in organized philanthropy is that the latter approachwould be like using the proverbial elephant gun to kill a gnat(even though in this case, the pesky gnat is pretty big). Commu-nity foundations have operated donor-advised funds successfullyfor years without violating the laws governing public charities,and logic dictates that it is the commercial funds that need to bereined in.

Even without additional government regulation of donor-directed funds, however, my bet is on the community foundations.While it is not true of all donors, there is good evidence that com-munity attachment, community involvement, is an enormous plusfor those who do their organized giving through some vehicle otherthan a private foundation. And in that example, a well-managedcommunity foundation in a donor’s hometown has it all over thebig bank in a distant metropolis.

More intriguing for the future-gazer is the competition we cannot even foresee from entities we can not imagine. Those involvedin U.S. foundation activity today believe there will be an increas-ing number of options for how donors do their philanthropy,


options we do not even envision today, resulting in a lot moreentrepreneurial thinking in the field.

• Diversity and inclusiveness are vital descriptors of effective philan-thropy of the year 2000 and beyond.

The words diversity and inclusiveness sound shopworn in someways, but there is absolutely no doubt that grantmaking willbecome more diverse and inclusive in both composition and prac-tices. Dramatically changing demographics will drive much of that,as an even greater percentage of the American public becomes lesslike the original “barons of philanthropy” in terms of race, ethnic-ity, and other such descriptors. Wealth created in new venues pro-vides another impetus; for example, there are now fourteen NativeAmerican tribes that have set up charitable funds (operating undertribal law that is separate from U.S. law, providing yet another chal-lenge).

Still another major driver behind the changing face of philan-thropy is the potential influx of new donors resulting from thatintergenerational transfer of wealth, a trend we have already begunto realize. And an intriguing challenge to philanthropy is how toidentify those new donors, both before and after the transfer takesplace. These are donors who are not coming from positions oftremendous or traditional wealth. In fact, the current potentialdonors—the older generation of the two—may even be surprisedto learn that their savings rates since World War II, their invest-ments in homes that appreciated enormously, the growth of theirinvestments after the advent of 401(k) and similar plans, and otherfactors have provided them the resources to think philanthropi-cally rather than just charitably. And the potential heirs to whommuch of this wealth is expected to be transferred need basic edu-cation in how the philanthropic impulse fits in with their otherplans.

Adding to the changing picture is the growing globalization of phil-anthropy, which is diversifying the face of philanthropy in new ways.The Council has fifty-five members that are not U.S.-based, and weare increasingly contacted by philanthropists from other countriesseeking to become more connected with organized philanthropy here.


The Council itself now has collegial agreements with nine grant-making associations in other parts of the world—Australia, Brazil,Canada, Mexico, South Africa, Spain, New Zealand, the UnitedKingdom, and all of Europe. And a Council-sponsored conferencefor these and other colleague organizations in early 1997 was attendedby twenty-one non-U.S. associations serving grantmakers. TheCouncil’s board of directors is talking seriously about the most help-ful and appropriate ways for us to encourage philanthropic activityworldwide.

Survey research findingsThese expectations of philanthropy of the future, heard during mytravels, are being confirmed daily as part of other, more formalresearch conducted by the Council. Some of it comes from ourwork on that 2000–2004 strategic plan, which will be completed bysummer of 1999. Consultants to the Council have interviewedscores of people familiar with the philanthropic scene to gaininsights that will guide us in our planning process.

And still other knowledge comes from research we commis-sioned as part of the Council’s Communications/Legislative Initia-tive, a three-year project begun in 1997 in which we seek to conveya greater understanding of the value of philanthropy to legislators,the media, and other opinion leaders. The research shaping theproject is based on 70 in-depth personal interviews with “influen-tials,” 901 telephone surveys (half with “influentials” and half withthe general public), interviews with 150 Fortune 1000 executives,and personal surveys of about 25 key Capitol Hill staff.

The research, released in December 1998, confirms somehunches and gives us new knowledge about people’s understandingof philanthropy, foundations in particular. Our plans for how wewill use the information to achieve the objectives of the initiativeare still being set, but the findings themselves have other uses aswell—including the forecasting of the future that is shaping ourstrategic plan.


Among the key findings:• Familiarity. Although people are familiar with foundations,

they have a very low awareness of what they are and what they do.• Foundations and other nonprofits. There is little distinction in

people’s minds between foundations and nonprofit charities.• Communication gap. Foundations speak internally in terms of

assets and processes. But external audiences believe foundationsshould focus more on positive benefits and results, on success sto-ries and innovation.

• Information sources. Respondents most often receive informa-tion about foundations from television and newspapers, with wordof mouth from friends and representatives of foundations consid-ered least likely sources of information. When asked what sourcesof information are deemed credible, however, respondents gavehigher rank to representatives of foundations and friends.

• Taxes. A majority of people agree that “the tax code shouldprovide incentives to encourage charitable giving, including givingto or setting up foundations.”

• Advocacy. Most respondents agree that “foundations have theright to advocate, speak out, and promote public policy issues tothe general public and lawmakers.”

• Accountability. The general public believes that foundations areand should be most accountable to the public.

It is an intriguing picture of a not-well-understood sector thatdoes not even speak of itself in terms that resonate with the public.It is a sector that is credible when it does speak, but that oftenleaves the speaking to other sources. It is a sector enjoying tax pref-erences that are approved by the public, a sector that also has pub-lic support for its involvement in public policy, and a sector that isseen as a public trust in terms of accountability.

When you lay that picture of foundations beside the foundationof the future envisioned by foundations themselves, it presents adaunting challenge. And a fascinating one.

For organized philanthropy, the new millennium may mean thebeginning of a whole new era. The future is not here yet—but it iscertainly on its way.


Notes1. A provision of the U.S. tax code known as 170(e)(5) was made a perma-

nent part of the code in an omnibus appropriations bill that passed Congressin late October 1998. The provision allows full deductibility of gifts of appre-ciated stock to private foundations (full deductibility has always been availableto community foundations, which are public charities). The provision hadbeen in effect for private foundations from 1984 to 1994 and was subsequentlyreauthorized several times for limited periods, until permanency was achievedin the 1998 law. This was the top legislative priority of the Council on Foun-dations during that time.

2. Two of the 18 percentage points in 1996 asset growth derive from theDavid and Lucile Packard Foundation, which realized a massive infusion ofassets from the estate of David Packard, who died that year. The FoundationCenter points out that in contrast, in 1994, with the appreciated assets tax coderule expiring, assets grew less than 4 percent.

3. Rep. Paul Gillmor, R-OH, introduced two bills in the 105th Congress(1997–1998) dealing with corporate philanthropy. HR 945, which he aban-doned, would have required corporate giving programs to allocate their giv-ing according to the directions of their stockholders, proportional to theirshareholdings. HR 944, later redrafted and expected to be reintroduced in the106th Congress, calls for additional disclosure about corporate contributionsto a degree considered burdensome and invasive by the Council. Included aresuch things as a provision requiring disclosure of a corporate executive’s vol-unteer board involvement, and that of the executive’s spouse, with any char-ity receiving such a contribution. The bill also would necessitate exhaustivelisting of grant recipients beyond what is currently required by law—a chill-ing prospect for a retailer with hundreds of branches, for example, that typi-cally allocates a relatively small amount of corporate giving dollars to eachbranch, which then has total discretion over the local giving. It is expected thatRep. Gillmor will hold hearings on his proposals in 1999, following release ofa Securities and Exchange Commission report on the matter that was orderedin early 1998.

DOROTHY S. RIDINGS has been president and CEO of the Council onFoundations since March 1996. Her career until then was in the news-paper business, as reporter (Charlotte, North Carolina), editor (Wash-ington, D.C., and Louisville, Kentucky), and most recently publisher ofKnight-Ridder’s Bradenton Herald, in Florida. She resigned her boardpositions at both the Ford Foundation and Benton Foundation upon join-ing the Council.


a new foundation for a new millennium

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