Leaders of 2 Foundations Reflect on the Process of Giving It All Away
Resource type: News
The Chronicle of Philanthropy | [ View Original Source (opens in new window) ]
By Caroline Preston. Atlantic Philanthropies, a multibillion-dollar foundation that supports a variety of causes including progressive priorities such as changing the U.S. health-care system, and the Avi Chai Foundation, a $593-million fund dedicated to strengthening Judaism, might not seem to have all that much in common.
But they are both guinea pigs in a growing philanthropy phenomenon, what one observer calls “charitable liquidation.” By 2017, Atlantic plans to give away all its money; by 2020, Avi Chai intends to do the same.
Interest in spending foundations out of business is greater than ever. But insights on how to do so well remain scant.
For that reason, Atlantic and Avi Chai have commissioned and made public reports to share what works and what does not when a foundation decides it wants to shut down by a specific date.
The reports, produced by independent consultants and based on interviews with people inside and outside the foundations, also probe the wisdom of setting a closing date.
One thing the reports illuminate is how difficult it is to know whether spending all the assets can create greater social value than giving away smaller amounts every year to ensure a philanthropy will operate in perpetuity.
The reports also suggest that many of the steps that foundations often take before they close—like focusing on a few specific causes and helping grant recipients learn to become self-sufficient—could be beneficial to other funds, too. But for foundations that are about to close, the consequences of not doing so are greater.
For example, the study of Avi Chai says the fund’s pattern of rarely working with other foundations will make it tougher for its grantees to find new supporters once the fund is gone.
The leaders of Atlantic and Avi Chai meanwhile face practical concerns, such as shaping investment and program strategy with less room to readjust, that their colleagues at places like the Ford and Rockefeller foundations do not.
In an interview with The Chronicle, Arthur Fried, chairman of Avi Chai, and Gara LaMarche, president of Atlantic, spoke about closing. The reports, which are the first of several on the two funds’ efforts to shut their doors, are available on the Web site of Duke University’s Center for Strategic Philanthropy and Civil Society.
Do you think about your work in terms of a legacy?
Mr. Fried: I have warned about getting too focused on legacy at the expense of what can be accomplished in the course of 10 years.
Mr. LaMarche: I would put it more in terms of impact than legacy. Every foundation, whether they’re spending down or not, wants to have an impact with the grants that it makes. But Arthur’s right: You can be paralyzed by being obsessed with your legacy.
How will you ensure that the causes and charities you support continue to thrive?
Mr. Fried: First, we have to decide which of the activities we’re involved with do we want to ensure their viability. Second, we have to begin to find ways of strengthening the capacity of certain organizations, to be able to live in an era without Avi Chai. Lastly, and most importantly, we have to get our trustees, staff, and management to think in a different way, ensuring everything is done in a manner that enables whatever we do to have continued traction long after we’re gone.
Mr. LaMarche: We’ve really begun to step up our investment in the sustainability of grantees. That involves things like how much of their budget comes from Atlantic; what are they doing to find other revenue sources. We will fund more organizational development, or effectiveness in advocacy campaigns, or effectiveness in communications.
The reports suggest that some of your grantees are hoping you will endow them. Is that an option?
Mr. Fried: If we want to endow, we’re not spending down. We’re just taking our fiduciary responsibilities and placing them in someone else’s hand.
Mr. LaMarche: I don’t know that we have a strong philosophical view, pro or con, about endowments for the institutions we fund. It’s more of a practical question. I don’t think we’re likely to endow institutions, because there really isn’t enough money. But it’s quite possible we’ll make significant multiple-year exit grants.
How difficult will it be to hold on to your employees and keep morale up as you prepare to close?
Mr. LaMarche: On the one hand, we’re living in a world where no one expects lifetime employment anymore, unless you’re a member of the United States Supreme Court. And yet, as we get closer to the end, obviously people need to think about whether they will take a job for five or six years. But we’re still making significant hires.
Mr. Fried: We have to continue to make this organization intellectually and philanthropically challenging to the staff. So far, we’ve been able to do that, especially in the last year.
Is it hard not to feel some remorse about shutting down a foundation when the important issues you work on remain?
Mr. LaMarche: There’s not remorse. But as you get more deeply into it, you realize that it’s challenging and that, as in anything in life, there are things you don’t anticipate. The downturn in the market tightened our ability to keep to our spend-down plan.
Mr. Fried: It’s quite the opposite. It’s an interesting dynamic, to witness how enthusiastically a group of fiduciaries and staff can come together. However, when we had to cut back because of the damage done by the markets, there was a feeling of remorse on the part of some of our trustees and staff. Things that were important to them, dear to them, we had to segue out of. That caused some people to wonder whether it would be better just to keep spending at the rate we’re spending and let the sunsetting take care of itself. I didn’t think that was the best way to go forward, and we didn’t do that.