The Asia-Pacific Centre for Social Investment and Philanthropy hosted the 2015 Commencement Lecture with guest speaker Professor Mark Sidel, the Doyle-Bascom Professor of Law at the University of Wisconsin-Madison and consultant for China and Vietnam at the International Center for Not-For-Profit Law.

Professor Sidel gave a talk on adaptability and change in institutions, looking at the hundred year history of community foundations in the United States.  (Many of you will be aware that 2014 marked the centenary of community foundations, which evolved from an organisational model developed in Cleveland in 1914).

Professor Sidel’s thesis is that there are two stories of adaptation which have come out of the community foundations movement – that of those who have grown and prospered, and that of those who have not done quite so well.  He also articulated it as contrasting those who have grown, demonstrated social impact and embraced social innovation with those organisations who have struggled to grow, struggled to make an impact, and struggled to handle social innovation.

Professor Sidel reminded us that community foundations were one of the first models to enable philanthropy to reach beyond the very wealthy, to enable more middle-class people to participate in community philanthropy.  While innovative for the time, there were also other models of adaptation in community foundation, such as the United Way and Community Chests.

A quick snapshot of the state of community foundations in the US at the moment:

approximately 765 community foundations in US

$64.9 billion in assets

$14.9 billion in grants every year.

Community Foundations make up 9% of the assets in foundations across the United States and represent 10% of United States giving.  They range in size and scope from the Silicon Valley Community Foundation which has assets of $4.7 billion – to those who have less than $100,000 in their corpus.  Professor Sidel noted frequently that it is difficult to speak about these organisations as one kind of institution given the range and difference within the field, even though they take the same legal form.

Community Foundations have grown significantly in the last 20 – 30 years, fuelled by the development of donor advised funds, however, this has meant that community foundations are now a vehicle for donor control (ie the donors can say where they wish their funds to be spent, and the community foundations have difficulty implementing their own social impact programs or addressing what they might consider to be greatest community need).  This makes it difficult for community foundations to provide innovative impactful solutions.

Other challenges faced by community foundations are how they can grow and interact effectively with their donors.  The distribution rules for community foundations (many of whom only distribute 5% each year makes it difficult for them to be innovative.

Donors have many more choices these days about where to put their money to make a difference, and competition for donors is fierce.  Professor Sidel predicts a continuing rise in community giving, but not necessarily through community foundations.  He quoted from Lester Saloman’s New Frontiers of Philanthropy: A Guide to the New Tools and Actors Reshaping Global Philanthropy and Social Investing and Social Investing and Leverage for Good: An Introduction to the New Frontiers of Philanthropy and Social Investment Oxford University Press (2014) which has a long list of of competitors for donor funds including social impact bonds, crowdsourcing, capital aggregators and secondary markets).

While community foundations were originally a creative adaptation for their times, they are now being threatened by new adaptation and models.  The very value proposition of community foundations (being place-based local vehicles for donors to give in their own community) is being challenged.

Some community foundations have maintained their traditional role – grantmaking in the local community, but there are three ways to move beyond this paradigm.  These include:

a) acting as a conduit for grantmaking for larger institutions (such as corporates)

b) collaborative and collective action

c) community convening and leadership.

Professor Sidel seemed to convey that unless a community foundation was moving towards community convening and leadership it was not necessarily enabling local philanthropy to move forward.  He spoke of the “innovation and impact inflection point” at which an organisation becomes a “leader”.

My understanding of his view was that unless and until community foundations can take on a greater leadership role, they will struggle to gain and maintain donors, given the wide range of innovative options now available to them.  He also mentioned that while community foundations were supposed to be about democratising philanthropy, on the whole, the community foundations remain largely for middle class and upper middle class donors, and do not represent the diversity of the communities they seek to support.  The need for financial survival has necessitated the prioritisation of raising funds against working within a representational context.

Professor Sidel noted a curious development for community foundations in their move towards self regulation through the US National Standards for Community Foundations. These work to bolster the legitimacy and accountability of the sector and are a response to the competitive environment.  He called it a “weapon in the struggle for donations and impact.”

Professor Sidel spoke briefly about community foundations outside the United States, which have developed from the 1950s and 60s with assistance from the Ford and CS Mott Foundations.  He compared the success of community foundations in the UK and Germany (48 and 348 respectively) with the lack of success in India.

Community Foundations have now also arrived in China, but it is too early to predict results, especially as Professor Sidel said, “while they are under intense scrutiny from Western foundations and scholars”.  He did not sound confident that the imposition of a western model on a culture which has thousands of years of history in philanthropy is necessarily going to work.

While Professor Sidel’s talk highlighted the early adaptability and innovation of community foundations, it seems that in some cases community foundations have lost their innovative edge.  The challenge now is to find a new road towards having impact and adapting to new eras and competitors.

What do you think about the history and the future for community foundations?  Will Australian community foundations suffer from the same competitive forces as those in the US?