In 2014 the Cleveland Foundation celebrated its 100th anniversary. It was a landmark celebration for the $2 billion philanthropy. The Foundation is not only important to that city but it was the founding institution of the community foundation movement.
In 2018 the Philadelphia Foundation will celebrate its 100th anniversary. It has done wonderful things for the city and region but its endowment is only $365 million – in a city that is four times the size of Cleveland. In fact, its size and its influence are a great deal less than that of other community foundations in almost any other city in America. Is this a problem that we can fix or has the clock run out on the local community foundation model?
Here is some historical context. The Cleveland Foundation was founded in 1914 by Frederick Goff; a prominent Cleveland lawyer. Goff had a long association with John Rockefeller and admired Rockefeller’s philanthropy, through the General Welfare Board in 1902 and then the Rockefeller Foundation, launched in 1913.
Rockefeller was one of a number of late 19th and 20th Century industrialists along with Sage, Carnegie, and Mellon, who pioneered privately endowed philanthropies.
Foundations in Cleveland, Chicago, and New York have more than $2 billion in assets, and Boston recently reached the $1 billion mark. Philly has trailed far behind with a $365 million endowment.
The big innovations of private philanthropy at that time were organizational and legal: Private endowments could now function in perpetuity with favorable tax treatment; hire professional staff; and stay aligned with original donor intent, rather than the whims of later heirs or executives.
Goff organized smaller donors to have the clout of the emerging private endowments. As a multi-donor trust, The Cleveland Foundation became a public charity, accountable to a broader representation, taking in money from many donors and focusing its endowment on charitable purposes.
Just as Rockefeller had a global vision for his Foundation, Goff’s vision was for one city and one region. While Carnegie was thinking about a national library system and Rockefeller was providing research dollars for innovations in agriculture, the Cleveland Foundation was worrying about conditions in the immigrant east end.
One year earlier Cleveland was also the birthplace of another democratic experiment in philanthropy: the community chest, later known as the United Way. Its structure was based on an interfaith charity in Denver 25 years earlier.
Community foundations and the United Way became the two mass philanthropies of the industrial age: the Vanguard gift funds and Kickstarters of a very different era. They organized donors at different levels of wealth and from different sources to invest in local civil society.
Immediately after the Cleveland Foundation was founded, prominent trust bankers and civic leaders followed suit in other cities: Chicago and Boston in 1915, Philadelphia in 1918 and New York in 1924. Today there are about 800 community foundations in the United States and a similar number around the world.
Where Philadelphia diverged from other big city community foundations is in asset growth and civic influence. Whereas Cleveland, Chicago, and New York have more than $2 billion in assets (Boston recently reached the $1 billion mark) Philly has trailed far behind.
Asset growth is not everything; effectiveness and influence can happen outside of larger pools of capital. They often do. But scale provides one important pathway to social impact, which is why a public foundation should exist.
The other way to be influential is by how you do things: through pioneering funding strategies, convening civic partners to work on problems together, becoming a warehouse for city and regional data and progress indicators, or creating technology platforms for donors and grantees so as to increase efficiency and effectiveness.
Philly Foundation’s small asset base has always been a bit of a mystery. Is it a question of leadership over many decades, long before the current President? Is it a question of the interests and capacities of the trustees? Why is the place so seemingly sleepy and content in comparison to others around then nation?
Some blame the lack of growth on the dominance of larger private foundations in Philadelphia that created their own endowments rather than deposit large sums with the community foundation. But there is no evidence to support that theory. There are too many other cities from Boston to Pittsburgh to Chicago where large private foundations exist alongside a larger community foundation.
The Pittsburgh Foundation was founded almost three decades after the Philadelphia Foundation and today is the 14th largest, with about $1 billion in assets. And Pittsburgh is a city with significant private, industrial era philanthropy; in fact it has one of the highest levels of philanthropy per capita in the nation.
The Philadelphia Foundation is the 43rd largest among community foundations nationally. But we are the 5th largest city and the sixth largest region. Moreover, the Philadelphia Foundation has been around for nearly a century, time enough to accumulate a more significant capital base.
The Foundation is currently looking for a new president to replace Andrew Swinney who announced his retirement several months ago. He has been at the helm since 1998. Andrew was brought in to build assets at the Foundation and on that front he did better than his predecessors. But neither he nor his board was able to channel much of the new wealth created in this region over the past two decades into the foundation.
The Philadelphia Foundation needs to make a more dramatic change than just a new President if it wants to keep pace with a city that has a new attitude about growth and stature. It needs a new operating strategy and a different brand.
Think about the growth of some of the newcomers to the community foundation field. I spent time working in Kansas City recently where the local community foundation now has assets of over $2 billion. It was formed in 1978 when a small group of donors passed a hat, as they describe it.
In 1998 the Tulsa Community Foundation was formed. Leaders there recognized (and were embarrassed by) the fact that Tulsa was the only major metropolitan area to not have a community foundation. Today, the Tulsa Community Foundation has assets of around $4 billion.
What is the difference between Tulsa and Philly? Since 1998 the Philadelphia Foundation had grown its asset base by $165 million. Tulsa added $4 billion during that same time. In 1998 the Philadelphia Foundation was the 25th largest community foundation in the nation; since then we have fallen further behind our peers.
There are two ways to grow the asset base: You can manage the endowment in ways that generate enough administrative resources while also adding to the corpus each year, and you can raise new money either through donor advised funds or large gifts that are not specified as to use, but that add to the endowment.
Some argue that changes in philanthropy are so profound that the business model of the community foundation may be broken. After all if I want to establish a donor advised fund, it is easier and quicker to use Vanguard, Fidelity, or others like them. As money managers they are in the business of fee efficiency and ease.
Moreover, there are numerous new Internet-based philanthropy platforms for raising money and giving money. I can search for interesting new options that attract my interest. And there are new funding circles developed by small donors formed outside institutional philanthropy.
This is the age of what economists and others refer to as disintermediation. Increasingly sophisticated consumers no longer need to use the older industrial era systems that intermediated their business and civic pursuits; you can go right to the customer or the source. Both community foundations and the United Way have to adapt to these changes or they lose relevance. Think of how donor advised designations have changed the United Way. The organization is increasingly just an administrative pass-through.
But none of these new modes of giving do the three essential things you want from a great community foundation or a more dynamic United Way: the perpetuity of an institution that cares only about this place, the capacity to help shape a bigger vision for the region, and the ability to build the knowledge and experience to help others effectively implement change.
There are two pulls in philanthropy that are hard to fully reconcile: the preference of donors to make choices and control the deployment of their gift and the need to build a more public pool of capital that can focus on solving problems (with collective input) over the long term.
To be effective at managing individual donors you have to be great at operations from marketing to technology based administration. To be effective at systemic change, you need to articulate a vision for the region that is compelling, but also more than the sum of the parts.
If you look at the growth of the new community foundations that have done well over the past few decades, they have become great at one or the other (sometimes both) of those two tendencies: donor marketing and asset growth or civic vision and influence. Right now we are not quite good enough at either.
Hopefully the Philadelphia Foundation that celebrates its 100th anniversary in 2018 will become the leader we need in public philanthropy.