Philanthropy is in crisis. Not just because of the recession, but the very core of how foundations do business. As Steve Gunderson, President and CEO of the Council on Foundations, pointed out philanthropy has evolved from “competitive grant-making, to strategic philanthropic investment, to public philanthropic partnerships” yet there is major disconnect between foundations and the nonprofits they serve.

Firstly, some interesting stats on foundation giving:

1500 of all foundations do 80% of the giving
Top 1200 foundations 45% of grants are $10K or less
Top community foundations, 85% of grants are $10K or less
48% family foundations give $15K grants and the majority of them have less than 1 million in assets.

According to Bill Somervile, President of Philanthropic Ventures Foundation, “We spend an awful lot of time on small grants.”

Foundations say it takes 15 hours to apply yet nonprofits say it takes 24-30 hours to apply. The amount of time applying weakens the field, especially when 43% of a grant given goes to transaction costs. That combined with the small amounts given means we need to do better with how money is given.

Bill asked, how can we revitalize philanthropy and ensure that it serves communities as best as it can?

  • Get out of office: You have to actively search for outstanding people. You don’t do philanthropy from behind a computer.
  • Get away from problem orientation and focus on ideas: We consider ourselves problem solvers yet we are really reactionary. We don’t think of an idea as good unless it is framed in terms of a problem.
  • Get creative and think originally: Bill prefers the term venture philanthropy because of venture capitalist who are active in their giving. It is a risk and philanthropy does not like failure. However, “Unless you have some failures, you are not doing your job right.”
  • Creating a partnership with whom you work: Get rid of the grantee-grantor relationship. This implies hierarchy when the reality is that we rely on each other heavily.
  • Be modest. Money is a source of power in our society. Yet our current relationship implies that those who asking for money have no power. We need to avoid that.

Bill’s organization does paperless giving and has a 48 hour turn around time when deciding and giving grants. This is a risk, but it is not reckless. He referenced Malcolm Gladwell’s Blink, and how refining your intuition can help you make better decisions. His biggest question was why wait? Why have non-profits fill out huge applications? Just listen to the idea and give the money. Make grants when money is needed—you’ll have more impact.

What we’ve seen instead of intuitive giving is a rise of academic philanthropy; an emphasis on measurement.  However, what ends up happening is that you control and stifle organizations instead of helping them meet their mission. Instead foundations should ask grantees how they measure success, visit the organizations more often, and see how the organization’s constituents perceive the organization. Institutionalize risk by setting aside money for interesting idea, not just problems.

Christie Tran of the Blue Shield of CA Foundation and Eyal Yerushalmi of Atlantic Philanthropies shared their experiences as young people in philanthropy. A concern brought up in the Q&A session, and was a recurring theme during the last part of the panel,  is that young people should be at a nonprofit making the change not funding the change.

They both agreed that direct service has a powerful role in grant making.  Christie came into foundation giving after years of grassroots work in Boston working for racial equality and stated how these hands on experiences help her in grantmaking. Eyal Yerushalmi commented that the limited experience that he has in the field in general means a lot more learning is necessary but good work is still possible.

However as Bill pointed out, everyone should be getting out into the field, not just those in nonprofits.  When we start to create hierarchies of social change, we increase the disconnect between foundations and nonprofits which leads to ineffective giving.  In the end each panelist defined philanthropic effectiveness in one word:  venture (Somerville) justice (Yerushalmi) transformation (Tran).  Each word embodies a movement towards more daring and more open giving–a calling philanthropy needs to answer.

Can’t come to the conference?  Check out the livestream or follow the conversation on twitter.  Make sure to visit Rosetta Thurman and  Trista Harris for their insights.