University of Southern California Dissertations and Theses

Community foundations and new governance networks: three studies exploring the role of regionally-networked philanthropic organizations in local problem-solving

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Community foundations and new governance networks: three studies exploring the role of regionally-networked philanthropic organizations in local problem-solving

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Content COMMUNITY FOUNDATIONS AND NEW GOVERNANCE NETWORKS:
THREE STUDIES EXPLORING THE ROLE OF REGIONALLY-
NETWORKED PHILANTHROPIC ORGANIZATIONS IN LOCAL PROBLEM-
SOLVING
by

Donald L. Morgan
A Dissertation Presented to the
FACULTY OF THE GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
PUBLIC ADMINISTRATION
May, 2007
Copyright 2007 Donald L. Morgan
ii
DEDICATION:
To Gramp
iii
ACKNOWLEDGEMENTS:
This research would not have been possible without the support of the John
Randolph Haynes and Dora Haynes Foundation. Additional support was provided by the
Center on Philanthropy and Public Policy at the University of Southern California. I am
grateful to both organizations for taking interest in this research and enabling me to dedicate
the time needed to contribute to the field.
I would like to thank Peter Robertson for taking a chance on me by accepting me
into the PhD program, Jim Ferris and Gib Hentschke for their work on my dissertation
committee, and the entire faculty and administration at USC who ushered me through this
process.
Special thanks to Elizabeth Graddy for adopting me during my first semester of
studies. Not only did her direction point me towards community foundations, but our work
together also taught me a great deal about how to conduct good research. Her rigorous
expectations of my work were matched by a generous level of support for a student
balancing a PhD program, a fulltime job, and the births of two children.
I want to thank Al Miller, S.J. who told me to “be a teacher.” I also wish to thank my
dad, Jan, Gram, Marc, Ann and Fife, Mary Dell, and Scott and Melissa for their interest in my
progress. Their support fueled my drive to finish what began so long ago. I want to
recognize my daughter Molly and son Donnie, who, without ever knowing it, inspired me to
complete something that might make them proud one day.
Finally, no words may adequately express my love and appreciation to my wife,
Whitney, for her unwavering support of my academic, professional, and personal pursuits.
Only a patient woman could endure the years of coursework, hours in front of the computer,
and ever-present apprehension that accompanies a Ph.D. Thank you.
iv
TABLE OF CONTENTS:
Dedication ii
Acknowledgements iii
List of Tables v
List of Figures vi
Abstract vii
Chapter 1: Introduction 1
Chapter 2: Community Foundations and New Governance Networks 8
Endnotes 47
Chapter 3: Community Foundations, Organizational Strategy, and Public Policy 48
Endnotes 77
Chapter 4: Grantmaking and Nongrantmaking Measures of Responsiveness in 78
Community Foundations
Endnotes 115
Chapter 5: Conclusion 116
References 123
Appendices
Appendix A: California CEO Interviews 129
Appendix B: Michigan CEO Interviews 130
Appendix C: Interview Protocol and Instrument 131
v
LIST OF TABLES:
Table 3.1 Percentage of California Community Foundation Pursuing Strategies 63
Table 3.2 Descriptive Statistics 71
Table 3.3 OLS Estimation of Strategy 72
Table 3.4 Binary Logit Estimation of Community Leadership 73
Table 4.1 Literature Review-Generated Hypotheses 89
Table 4.2 Sample of Proposed Measures of Responsiveness 91
Table 4.3 Existing Models 92
Table 4.4 Case Study-Generated Hypotheses 112
vi
LIST OF FIGURES:
Figure 2.1 Proposed New Governance Network 10
Figure 3.1 Determinants of Strategic Direction in Community Foundations 59
Figure 3.2 Observed Patterns in Community Foundation Strategic Choices 62
Figure 3.3 Fidelity Charitable Gift Fund Net Assets ($ Million) 65
vii
ABSTRACT:
This collection of three studies presents conclusions that impact the way research is
conducted on local problem-solving. The broad goals of the research aim to explore
changing leadership structures at the local level as a result of the transition to new
governance arrangements. A reduced public sector role in local governance has left a
leadership void in many communities. Local community development efforts have been
realigned from a vertically-directed structure to a networked system dependent on
collaboration amongst cross-sectoral participants. The search continues within these
networked structures for an organization or leader to facilitate collaborative initiatives.
Community foundations are presented as one potential solution to the leadership
question. These regionally-networked philanthropic organizations are posited to have
strategic advantages over the public sector and other private sector service providers as a
result of their position in the community. The three studies presented are designed to
explore this proposition through a progression of research questions that look at the
institutional variables that impact an organization’s ability to adopt a community leadership
strategy, the internal and external determinants of strategic choice within community
foundations, and a set of new hypotheses that may guide future research attempting to
demonstrate evidence of grantmaking and nongrantmaking responsiveness to the
community.
Results suggest that the public sector is limited by a set of institutional constraints.
These constraints are less likely to be observed in community foundations. Evidence of
community foundation leadership is mixed. Examples of community leadership demonstrate
the potential for a significant facilitating role, while the data show that there is not universal
adoption of community leadership as a goal. Determinants of these decisions include the
age of the foundations, stability of the community served, and competition from other
viii
philanthropic service providers. New approaches to measurement of responsiveness must
be developed to inform future research on the impact of community leadership.
1
CHAPTER ONE: INTRODUCTION
1. Problem
Devolution of policy making, funding, and administrative responsibility for addressing
regional issues has left many local communities scrambling to identify organizations or
leaders capable of guiding local problem-solving. The diminished role of the public sector
has made space for the private (for-profit, nonprofit, and philanthropic) sector to assume a
more significant role in facilitating cross-sectoral regional networks. Effective facilitation of
such networks is dependent on placement within the community as a trusted partner
possessing established relationships with the diverse group of participants needed to pool
resources to collaboratively create, fund, and implement new programs. This research tests
the assertion that regionally-networked philanthropic organizations are strategically
positioned to adopt this role.
The potential for regionally-networked philanthropic organizations to assume a
meaningful leadership role in local problem-solving has been largely ignored by new
governance literature. Little attention has been focused on analyzing the capacity of
organizations like community foundations to facilitate local problem-solving by capitalizing on
the place-based advantages they possess. This series of studies attempts to undertake
such analysis by looking at community foundations in terms of (1) the institutional
characteristics that enhance their participation in new governance networks, (2) the internal
and external determinants of the strategic choices made within the organization, and (3)
potential new measures to demonstrate evidence of responsiveness to the local
communities they serve.
Community foundations are presented as one example of the type of organization
that may assume a leadership role in regional networks. This research does not suggest
that community foundations are the only regionally-networked organizations endowed with
2
the resources to be effective local leaders. Similar studies could analyze the role of other
organizations such as local United Ways or community-focused private foundations. A
dominant focus on community foundations was adopted to facilitate a more robust
exploration of the research questions by analyzing a smaller segment of the regionally-
networked philanthropic organizations field.
Guiding these studies are three distinct research questions; (1) how do institutional
variables influence capacity to serve as a local-level network facilitator for the public sector
versus regionally-networked philanthropic organizations, and what theoretical model will
guide exploration and explication of these roles in the future? (2) How do organizational
and community characteristics (e.g. age of the organization, size of endowment,
demographics of the community) affect the strategic choices (e.g. focus on donor services
versus a focus on community leadership) made by community foundations, and what effect
do these choices have on the role of community foundations in new governance? (3) What
set of new hypotheses are going to guide future research attempting to provide evidence of
grantmaking and nongrantmaking responsiveness in community foundations?
2. Methodology and Hypotheses
This series of three studies utilizes a unique methodology and sample for each
research question in order to test the role of community foundations in new governance
networks. The inherent difficulty in predicting community foundation behavior and the lack of
existing theory to offer measures for testing these predictions lend themselves to a mixed
methods approach to analysis. The following chapters attempt to identify areas of
vulnerability in the current research and contribute to the field by (1) offering new theory for
prediction and assessment of leadership capacity; (2) offering a new set of variables to test
the determinants of strategic choices being made within community foundations; and (3)
offering case studies of current community foundations to generate a set of hypotheses that
may guide assessment of local-level responsiveness.
3
Chapter Two introduces the key contributions of new governance literature to frame
the subsequent testing of community foundations within the field. The chapter conducts a
preliminary normative institutional analysis of both the public sector and private philanthropic
sector to develop a construct for predicting the capacity of public and private organizations to
lead local-level change efforts as a network facilitator. Development of a new model draws
heavily on current literature coming out of the fields of public policy, economic theory, and
organization development to suggest an expanded role for community foundations. Analysis
of each sector is conducted using four well-tested theories: (1) resource dependency; (2)
transaction costs; (3) goal congruence; and (4) principal-agent theory. Comparison of the
two sectors using these theories for analysis offers a structure for testing the hypothesis that
there is a negative relationship between the institutional constraints of the public sector and
level of performance as a network facilitator. It argues that the challenges posed by network
coordination and facilitation may most effectively be addressed by regionally-networked
philanthropic organizations that are positioned to create institutional incentives for
participation and compliance.
Chapter Three empirically analyzes the determinants of strategic direction adopted
by community foundations using a new data set consisting of 30-60 minute phone interviews
with 34 CEOs of community foundations in California and the collection of demographic
information from the counties they serve. A set of three potential strategies (donor services,
matchmaker, and community leader) are introduced and defined to offer categories for
placement and comparison. Each community foundation is assigned to a strategy over the
course of 15 years to analyze strategic choices longitudinally. The study utilizes a qualitative
analysis of the interviews to learn from anecdotal data about the influence of strategic
partners, founding gifts, and philanthropic competition on strategic choice. Additional
independent variables such size of endowment, age of the foundation, and stability of the
community are be tested empirically by running Ordinary Least Squares (OLS) and Binary
Logit Estimation (Logit) regressions to measure strategic influence during each time
4
period. Results test the hypothesis that community foundations proceed through a modified
life-cycle that is defined both by circumstances at founding and influences over time.
Implications for public policy and community development are explored using the results.
Chapter Four is an exploratory study that identifies potential new measures of
regional responsiveness for community foundations. A review of current measures used to
test responsiveness is presented to assess the state of the field. Critique of these measures
is based on existing research arguing for a new orientation toward measurement of
responsiveness. A set of preliminary hypotheses for future studies is presented based on
adaptations of the measures offered by the literature. Five previously published models for
conducting research on responsiveness are reviewed and analyzed to structure an adapted
model for future testing. The adapted model frames a cross-case analysis of two original
case studies presented by the research. The California survey was replicated in the State of
Michigan with new interviews of 27 community foundation CEOs. The two case studies
were then selected from these data and presented to offer applied analysis. The cases are
explored to generate a second set of hypotheses that may guide ongoing efforts to provide
evidence of grantmaking and nongrantmaking responsiveness. Generation of these
hypotheses may inform future efforts to empirically test community foundation activities to
enhance the predictive ability of research in the field.
3. Sample
The theoretical framework for all three chapters is built upon Chapter Two’s
presentation of the current literature and normative institutional analysis of the public sector
and private philanthropic sector since the New Deal. Broad characterizations of the public
and private philanthropic sectors are used in Chapter Two to identify the institutional
strengths and limitations of each sector. Conclusions are to be explored further through
analysis of the two sample sets presented in Chapters Three and Four.
5
Chapter Three presents data collected in the State of California. The chapter
argues that the demographic and geographic diversity of California offers a robust set of
communities to study. This diversity is shared by the state’s community foundations, which
vary significantly in terms of assets, age, strategic direction, and geographic location. This
variation lends to the consideration of the research question in considerable depth. In part,
the richness of the population results from the disproportionate presence of community
foundations in the state. Moreover, California foundations are a significant and growing
proportion of the country’s philanthropic landscape.
Community foundations from the State of Michigan, introduced in Chapter Four,
offer an interesting comparison to the California data set. Community foundations in
Michigan resemble California in number, size, age, and membership in an umbrella
organization. Michigan also offers variation in both urban and rural settings and range of
assets. Data from the 27 CEO interviews is presented to provide context for some of the
descriptive elements of the chapter. More detailed analysis is conducted using the Grand
Rapids Community Foundation and the Manistee County Community Foundation. The two
community foundations presented as case studies differ in size, age, and geographic
location. However, their leadership of local community and economic development
initiatives provides evidence of the types activities that may influence performance as
community leaders.
4. Expected Findings
Each question will produce results that may advance understanding of developing
new governance networks and the role of regionally-networked philanthropic organizations
within these structures. It is expected that results will show that the public sector may no
longer be the most effective facilitator of local-level problem-solving and that community
foundations (and other regionally-networked philanthropic organizations) are in fact well-
6
positioned to facilitating new governance networks because of the institutional relationships
they form due to the nature of the way they conduct their business.
However, results may also show that while there are significant examples of
community foundations that have embraced the community leader role, the field has yet to
universally adopt such a role as a goal. The pace of adoption may be influenced by
determinants of strategic direction that inhibit community foundations from immediately
realizing the potential for community leadership or network facilitation. If this prediction is
supported, then policy-makers will need to temper their expectations of the field. Many of
the current policy decisions being made at the national, state, and local levels assume a
larger role for organizations like community foundations. If evidence shows these
organizations to be prohibitively far from being able to expand their focus, then current policy
needs to be structured accordingly.
Adoption of the community leadership model may have implications for local-level
responsiveness. A new model for community leadership or network facilitation may
introduce a set of responsiveness variables that are more difficult to define and measure
than traditional grantmaking activities. It is expected that the community foundations with
the greatest impact on their region will be those that have embraced community leadership
as their primary organizational strategy. These foundations will pursue cross-sectoral
relationships with community partners to maximize the impact of their actions and coordinate
diverse interests. Accomplishment of these goals may provide other regions with a set of
tools to stimulate local-level leadership in their communities and new measures to assess
the impact of implemented programs.
5. Contribution to the field
The conclusions presented by this dissertation will offer insights into the rapidly
changing processes of local development. The questions asked by this research will
prepare academics and practitioners from the fields of economics, social sciences, policy,
7
administration, and politics to better structure their models around the concept of new
governance networks.
Conclusions will be expanded in order to have relevance beyond the progress of
community foundation development. Future studies may be encouraged to build on these
preliminary efforts by suggesting steps to move community foundations, or other regionally-
networked philanthropic organizations, toward a more significant governance role.
8
CHAPTER TWO: COMMUNITY FOUNDATIONS AND NEW GOVERNANCE
NETWORKS
1. Introduction
The last forty years have hastened dramatic change in the ways our most significant
community problems are addressed. The processes of developing, funding, coordinating,
and delivering services to local communities have been challenged to keep pace with
changing policy-making and implementation structures. The role of the public sector has
diminished over time due to ideological shifts, devolution, budget cuts, revenue constraints,
and calls for greater efficiency. New governance theory has developed in the midst of this
transformation as a framework for understanding the expanded roles of the private for-profit,
philanthropic, and nonprofit service sectors.
Privatization, contracting, and public-private partnerships have pulled non-
governmental industry into the formerly public realm to create new models for cross-sectoral
cooperation and service provision. At the same time, shifts in program funding have placed
new challenges on nonprofit service providers and a unique burden on the philanthropic
sector to fill the funding gap left by public spending cuts. The result has been a fragmented
system of service provision and funding sources that is often ill-equipped to comprehensively
address the most pressing issues facing communities today.
The Achilles heal of new governance theory is the omission of a coordinating entity
to facilitate local conversations about change. Newly developed structures of collaboration
and service provision have at times resulted in significant public budgetary savings,
efficiency gains, and improvements in service quality. They have, however, also splintered
community efforts to coordinate services within the context of a comprehensive plan for
change. This research attempts to understand the type of organization or collaborative
system that is best-equipped to guide new governance structures.
9
Organization Behavior scholars have noted significant challenges in their field as a
result of developments such as of globalization, technological advancement, and
environmental degradation. Authors have responded with a call for greater cooperation,
collaboration, and participation within and between organizations (e.g. Robertson, 1999).
Organizational response has been slowed by an inability to move away from deeply
engrained hierarchic and competitive paradigms. While scholars and practitioners alike
have acknowledged the need for greater participation, they have found it difficult to structure
large conversations about change.
Organizational behaviorists have searched for a theory that provides a framework
for coordination amongst participants. The introduction of network theory has opened the
door for scholars to analyze multi-organization discourse and how the goals of participants
may be enmeshed (Miles and Snow, 1984). Common amongst much of the work offered by
network theorists is the recognition of a vital role played by a facilitator
i
.
This paper suggests that regionally-networked philanthropic organizations (e.g.
private foundations, community foundations, and the United Ways) may be uniquely
positioned to assume the role of community-level facilitator within the larger networks of
policy formation and service provision introduced by new governance theory. Community
foundations are analyzed as one particularly effective example of a regionally-networked
philanthropic organization. Community foundations are the link between private and public
funding sources, change advocates, policy makers, and the local nonprofit organizations
charged with serving their communities. Their strategic advantage has traditionally been
their placement within the community as grant-maker, fundraiser, and information resource.
Community foundations strive to match the philanthropic desires of donors with
glaring, and at times more subtle, community needs. This mission requires them to build
relationships with sources of funds (private for-profit organizations, private philanthropic
organizations, private donors, public administrators and agencies) while maintaining a clear
understanding of community need and information about the organizations addressing
10
these areas (nonprofit organizations, community development organizations, for-profit
service providers). These attributes may situate community foundations in the middle of
conversations about change (see figure 2.1), position them to earn the trust of stakeholders
as a well connected regionally-focused private charity, and make them an effective medium
to facilitate cooperative local-level efforts.
Figure 2.1 Proposed New Governance Network
Members of the research community have called on community foundations to
consider adopting the role suggested by this paper (e.g. Bernholz, Fulton, and Kasper, 2005;
Carson, 2004; Kramer, 2005). Current research, however, is limited in offering a theoretical
foundation to explain this role within the context of the larger governance structure. This
paper will analyze key contributions to new governance theory. The call for coordination that
links these scholars will be explored. Network theory will be introduced as a framework for
identifying the requisites for coordination. A new model will be offered to assess the
institutional determinants that influence what type of organization is best-prepared to serve
as facilitator. The public sector will be analyzed using these influences and compared to
community foundations, which are introduced as an example of the type of organization that
may offer a potential solution to the challenges posed by new governance theory.
Public Administrators and Agencies
Nonprofit
and
For-profit
Service
Providers
Private for-profit Organizations
Private
Philanthropic
Organizations
and Donors
Regionally-Networked Philanthropic Organizations
(Community Foundations)
11
This research hypothesizes that there is a negative relationship between the
institutional constraints of the public sector and level of performance as a network facilitator
in new governance networks. It argues that the challenges posed by network coordination
and facilitation may most effectively be addressed by regionally-networked philanthropic
organizations that are positioned to create institutional incentives for participation and
compliance.
2. New Governance Theory
The breadth of phenomenon examined by new governance theory makes it
inherently difficult to define. Scholars have approached the topic from several perspectives
ii
.
Research has developed into a collection of theories that attempt to make sense of the
changing governance structures guiding local communities today. Common amongst much
of this work is the call for new approaches to organizing decentralized cross-sectoral
networks. While some scholars explicitly, or implicitly, suggest the need for a facilitator
(other than the traditional role played by public agencies), few offer a construct for the type
of organization that may thrive at this capacity. Most remain focused on the public sector’s
capacity to transition to new management structures (e.g. Goldsmith and Eggers, 2004).
The focus on public management has been an important starting point for
governance research. The pioneers of new governance research are to be credited for
beginning the process of defining network structures and laying out the challenges for
participants. The seminal works on new governance have created the space for new
research to look beyond the public sector for potential network facilitators.
Pierre (2000) suggests that new governance structures are the empirical
manifestations of state adaptation to external influences. In contemporary society, these
external influences include an ideological shift away from the welfare state, tax reform,
budget constraints, and major transitions in service provision and funding responsibility.
12
These influences have pushed the public sector to experiment with innovative approaches to
policymaking and service delivery while limiting spending.
The empirical manifestations of this transition may be noted primarily in the evolution
of public sector participation and growing dependence on the private for-profit, philanthropic,
and nonprofit sectors. Two approaches to governance research have developed to study
these manifestations. The first looks at how the state steers the governance process while
the second focuses on the formal and informal institutions involved (Rhodes, 1997). It is
clear that a singular focus on one approach will disable a theory that attempts to understand
governance more broadly. Local-level coordination requires a blend of institutions working
together with awareness of the fact that formal authority exists at some level to ensure
compliance and accountability (Ostrom, 1997; Kettl, 2002).
Goss’ (2001) work attempts to look at both levels of analysis by focusing on the
relationship between government and people. She suggests that community engagement
has been overly-developed with too much control from the top. The state has been quick to
devolve responsibility for funding and service delivery to the community level, but has been
slow to relinquish control. Uncertainty about issues such as accountability to the public and
viability of the nongovernmental sector to absorb shocks from public spending cuts has
complicated the transition. This has limited the realization of benefits suggested by local
control advocates (e.g. efficiency gains, lower transaction costs, innovative new approaches
to problem-solving).
A governance structure capable of realizing the theorized benefits of local control
requires participants from each sector to accept a new set of responsibilities (Goss, 2001).
Salamon (2002) suggests that new governance theory moves coordination away from
hierarchic public agencies to cross-sectoral organizational networks. In doing so, authority is
shared amongst participants. There seems to be some agreement around this idea.
However, studies have uncovered complex collaborative systems with few examples of
effective management and control (Salamon, 2002) and decentralized governance
13
structures with limited capacity to ensure compliance to the goals of the network (Sanyal,
2006). The challenge for the field is to describe an institutional structure that incentivizes
participation and compliance without limiting innovation and agility.
A theory capable of guiding the progress of new governance is strengthened by
rooting itself in the realities of our historical foundations and the unique challenges facing
communities today (Kettl, 2002). New governance theory did not develop over night as a
result of welfare reform. The public, private for-profit and nonprofit sectors have been
working together at different capacities for decades. Kettl (2002) suggests that Government
Owned Contractor Operated (GOCO’S) arrangements introduced the public sector to
contracting as early as World War II. Salamon (1995) adds that significant growth in the
nonprofit sector occurred in conjunction with the largest expansion of government programs
in our history (1960’s). As early as the 1970’s, the nonprofit sector was the principle service
provider of government-funded social programs (Salamon, 1995).
The ideologically motivated rhetoric of the 1980’s fostered the idea that interaction
between the state and nonprofit organizations hindered the ability of nonprofits to realize
their potential as social innovators. Spending cuts in the United States and Britain were
justified by the suggestion that interaction between the welfare state and nonprofit
organizations stifled nonprofit productivity and local-level problem-solving. A thoughtful look
at the data has shown that this characterization ignores a long history of cooperation
between the state and the nonprofit sector (Gidron, Kramer, and Salamon, 1992). It is
important to recognize this history of cooperation as contemporary pressures place more
emphasis on cross-sectoral coordination today.
This area has been largely ignored by current research. Attention, instead, has
been directed at the set of tools used to actuate governance partnerships (e.g. Kettl, 2002).
Scholars have focused on the options available to the public sector for engaging private for-
profit and nonprofit providers (e.g. contracting, public-private partnerships, or privatization).
This characterization of governance presents the state as a “vending machine,” with
14
administrators selecting particular tools based on the unique needs of the situation (Kettl,
2002).
Vital to the success of these choices is a clear understanding of the influences
exacerbating the problems being addressed, the options available to combat these
problems, and the motivations and needs of each participant asked to contribute to a
solution. A focus that is limited to the choice of instrument may not adequately create theory
to guide consideration of these larger issues.
The governance process is better described as a discourse than an instrumental
choice. The complexity of issues facing communities today make it imperative that diverse
voices are invited to contribute to creative problem-solving. Some have suggested that
marketizing services has the potential to create more innovation and involve more
organizations in local-level problem-solving through competition. It seems, however, that
this focus is still more concerned with choice than process. Preoccupation with choice
ultimately narrows the scope of research to the entity making the decision between
instrumental options and ignores how the organization will work with others to multiply
results.
Redirecting research toward the process of bringing stakeholders around the table
to collectively address our most challenging local issues introduces new potential for policy
definition, creation, and implementation. Salamon (2002) argues that attention must be
placed on coordination, regardless of which tool is being implemented. The task for new
governance research is to understand the dynamics involved in hosting these conversations.
Who should participate in these conversations? How are they most effectively structured?
Who is positioned to provide the space to convene relevant participants and ensure
enmeshed movement toward a common goal?
The nature of these questions changes the unit of analysis from the choices being
made about tools for service provision to the process of collectively engaging in local-level
problem-solving. The cross-sectoral make up of these conversations invites the use of
15
theory that informs our understanding of multi-participant systems. The use of network
theory may provide guidance in understanding these structures (Salamon, 2002; Goldsmith
and Eggers, 2004).
3. Network Theory
Barabasi’s (2003) recent book, Linked, suggests that links and connections in nearly
all aspects of society have taken over. As a result, those who wish to survive the rapid pace
of change in a globalized world must make an effort to understand the effects of our
developing networks. Organizations are moving away from the hierarchic structures that
dominated much of the twentieth century. Vertical lines of authority that disseminated
directives from the top of the organization to lower levels are being replaced by webs of
interconnected organizations that thrive on input from all participants.
This shift has changed the rules of engagement. Economic theory has for many
years painted organizations as autonomous entities driven by a desire to maximize profits
through competition. Interaction between organizations in this arrangement is often limited
to mutual participation in the market (Barabasi, 2003). Success in the market is determined
by an organization’s ability to drive the hardest bargain for immediate profit. Today, the
realization of networked interdependence moves those wishing to be successful to consider
a long-term outlook that thrives on partnerships rather than competition (Powell, 1996)
We may observe a similar transformation in local-level organizing. Practitioners
have come to realize that the size and scope of issues facing many communities are beyond
the capacity of one organization to solve. The government driven, one-size-fits-all
approaches of the past are no longer equipped to handle the complexity of contemporary
issues (Goldsmith and Eggers, 2004). Isolated strategic planning is being replaced by
collective efforts to pool resources.
This approach runs counter to much of the existing research. The introduction of the
market-state into social service provision was intended to relieve pressure placed on the
16
public sector by encouraging service providers to compete for greater efficiency. The public
sector’s efforts to diminish demand on its agencies have had several unexpected results.
The expectation of more efficient programs has placed higher demands on the public sector
rather than lower. Public calls for choice and quality remain fixed on a public sector that is
slow to respond. The pace of response frequently disappoints a watchful public and
ultimately devalues government (Treverton, 2005).
Response has been slow because heightened levels of expectations have gone
beyond that which the public sector is able to fund on its own, even with cost-saving
governance partnerships. The public appetite for choice of programs has moved public
agencies to look to networks to provide that which current contracts and grants cannot. As a
result, the interactions between the public, private, and nonprofit sectors have been
permanently altered. The public sector no longer directs the entire process through the
budget. New decentralized roles are being considered as alternatives to hierarchic
government control.
Participants from all sectors realize that they must turn their focus to each other in
order to coordinate efforts to address problems collectively and efficiently. Limited
resources, and the scale of many issues being addressed, have moved participants to
consider long-term solutions to problems that are dependent on a network of organizations
working together. In the process, the fates of local organizations became interconnected
(Gray 1990).
A great deal of research has been conducted to analyze these interconnections.
Different models have been offered to illustrate the structure of these relationships. Some
scholars have turned to a star-shaped network with decisions being dictated from a centrally-
located hub. Centralized control in this structure is frequently maintained by the public
sector. This image of the network may be too static to describe the dynamic nature of
multiple relationships forming around different issues at one time. Barabasi (2003) offers
17
instead, a web of interactions occurring without obvious structure. This decentralized image
is characterized by its own set of challenges.
The question of coordination is paramount to understanding networks, regardless of
how the network is conceptualized. Barabasi’s (2003) networks are described as a web with
no spider. He suggests that a series of hubs or connectors exist within the network to
stimulate, but not control, interaction. The lack of a spider spinning the web’s growth opens
the door for more than one stakeholder to actively contribute to the network’s direction, but
also introduces questions about accountability.
Miles and Snow (1984) were the first to describe a particular interorganizational
system called a “dynamic network.” Their system includes a key strategy maker or broker
(Lawless and Moore, 1989). The broker helps mesh the individual goals of cooperative
agencies. Mandell (1984) adds to this definition by suggesting that the broker also serves as
an intermediary or go-between throughout the life of the partnership. In this role, the broker
helps to manage sensitive interdependencies that have the potential to create conflict
(Margolis, 1975).
Both broker models describe a centrally-located agent with responsibility for actively
negotiating agreements amongst participants. This is an important role in any collaboration,
particularly as partnerships are moved beyond the command and control model to a model
structured by negotiation and persuasion (Salamon, 2002). The potential liability of this
model in governance systems is the placement of authority with the organization possessing
the most fiscal power. The resulting structure would not look unlike the traditional
arrangements driven by the public sector.
Mandell (1984) introduces a “continuum of power” with a strong centralized broker
on one end and a passive facilitator on the other end. The location of a broker or facilitator
on this continuum may have significant influence on the success of governance
arrangements. One extreme creates a dynamic where the partnership is directed by a single
18
influence while the other risks bringing organizations together with no structure to come to
agreement or hold anyone accountable.
The optimal role for a local-level facilitator rests somewhere in the middle of
Mandell’s continuum. New governance theory has the potential to inspire active participation
by key stakeholders in each community. Each of these stakeholders brings with them
significant authority over their domain. Any effort to create collaboration amongst these
stakeholders requires a structure that respects the individuality of participants by inviting
them to bring to the table their greatest skill sets and contribute that which they do best
(Salamon, 2002).
Optimizing this structure may require the facilitator to serve metaphorically as the
table around which stakeholders gather to address important community issues. It is
tempting to underestimate this role. The table offered for discussion could simply be
provision of space. There is, however, a much more significant demand satisfied by this
role, and a set of characteristics that may determine who is best prepared to facilitate.
There are examples from current research of studies that raise important questions
by attempting to look at non-governmental facilitation. Sanyal (2006) explores in some
depth the challenges faced by intermediary non-governmental organizations attempting to
undertake this type of facilitation. The case study offered by the research provides evidence
of the tradeoffs involved in choosing a decentralized facilitation structure over centralized
control. While the promise of transaction costs savings rests well-within the grasp of
decentralized network goals, institutional factors slow the realization of these benefits.
Sanyal demonstrates that voluntary compliance to network goals is difficult to police
in light of resource scarcity amongst some of the participants. Participants are asked to set
aside purely opportunistic behavior in order to build the level of trust needed to thrive in
partnership. The facilitating organization must offer resources that incentivize continued
participation. Effective incentives include local legitimacy, bridges to additional resources,
vertical integration of inputs to bind the success of participants to each other, and local
19
knowledge. These incentives may be provided by some organizations more effectively than
others. The following model builds on existing findings by attempting to offer a structure for
assessing potential facilitators.
4. Model
This paper suggests that the public sector may no longer be equipped to serve as a
facilitator of local change efforts and that regionally-networked philanthropic organizations
may in fact be better positioned by nature of their institutional relationships with local
partners. A normative analysis of these assertions requires a model that introduces a set of
criteria against which each sector is compared and provides a structure for conducting
comparative work. This model offers a starting point for creating empirical measures for
assessment of network facilitators in an effort to move beyond the anecdotal roots of current
analysis.
Success in assembling and coordinating a productive cross-sectoral network is
dependent on several factors. New research has attempted to introduce structures for
analyzing these factors. Common amongst many of these projects is the use of case study
to identify the similarities observed across geographic and sectoral boundaries. The model
offered in this paper draws on the conclusions of many of the case studies that have
preceded it. It attempts to build on existing work by integrating several commonly mentioned
theories into one structure for analysis. This model incorporates four existing theories into a
set that may be used to assess the institutional factors that influence an organization’s ability
to serve the facilitator role: (1) resource dependency, (2) transaction costs, (3) goal
congruence, and (4) principal-agent theory. The behaviors predicted by these theories are
the dominant influences on local governance and will continue to be the key factors dictating
collaborative success in the future. An institutional analysis of potential facilitators, using the
collection of theories offered here as a framework, will advance our understanding of
governance coordination and enhance the predictability of future research.
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Resource Dependency
The nature of the relationships that exist between stakeholders heavily influences
the way collaboration occurs. Due to resource scarcity, control and acquisition of resources
is a key factor in all networked structures. Resource dependency theory offers a foundation
for understanding the influence resources have on network governance.
Pfeffer and Salancik (1978) provide an important introduction to resource
dependency by offering three factors that must be considered in determining dependence of
one organization on another. They suggest that researchers must consider the importance
of the resource to the organization attempting to acquire it, the discretion the organization
may have over the resource once acquired, and the available alternatives for accessing the
resources. This view introduces a broad understanding of dependency, suggesting that
“loosely coupled coalitions,” as Provan (1983) calls them, are complex interactions that are
strengthened or weakened by individual organizations making decisions about their
participation based on their level of dependency on others.
Contemporary networks are characterized by larger numbers of small suppliers with
greater operational dependence on each other. The proliferation of alternatives for
participants has changed the face of negotiation, placing the organizations attempting to
acquire resources in a position to demand more control. This is a much different
arrangement than that which has been observed in the past with resources controlled by
only a few organizations.
Early resource dependency theory argues that organizations are strategic and
autonomous in negotiations for the resources needed to survive and gain power (Powell and
DiMaggio, 1991). In a competitive market, each strategic exchange is made with the best
interest of the organization in mind. In an environment with scarce resources and fewer
alternatives for negotiation, organizations relinquish the power endowed in autonomous
decision making. Decisions are dictated by survival and the terms of negotiation are set by
21
the organization possessing the resources. This arrangement has a ripple effect on all
participants in the network.
The relationships between funders (foundations as well as public agencies) and
service providers (private business and nonprofit) have traditionally been dominated by
control of grant or contract dollars. Interaction in these relationships has frequently been
characterized by the publication of a Request for Proposals (RFP) with a specific set of
parameters offered for available funds. Service providers have then been challenged to find
programs that fit within these parameters. There have been exceptions, but in most cases
interaction has been limited to the process of requesting and granting funds. This dynamic
creates a space between participants, making true collaboration difficult to achieve (Brown
and Garg, 1997).
The coercive power endowed in controlling funds complicates participation, both in
terms of the funder / recipient relationship and the relationship between other stakeholders.
Oliver (1990) points out that federations which are bound by funding arrangements often
experience misinterpretations about equity, leading to concerns about reciprocity and trust.
These misconceptions may severely limit the effectiveness of local networks.
A facilitator that is viewed primarily as the dominant source of funds fosters a
competitive environment that limits incentives to participate in collaborative work. Dhanaraj
and Parkhe (2006) point out that the “hub firm” must not only provide a partnership that
allows participants to contribute and extract benefits for the network, but it must also
enhance the spread of knowledge across boundaries and provide a structure of stability for
the network. Effectiveness as a facilitator will be measured by the ability to balance a set of
responsibilities that go beyond control of resources. Those that are unable to adopt an
expanded set of responsibilities will fail in areas where there are alternatives for participants.
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Transaction Costs
The costs of participation are of primary concern to members of any network. As
Frumkin and Treschan (2005) point out, rational actors make decisions based on a
calculation of advantage and interests. Primary to such calculations is Coase’s (1937) work
on transaction costs. Coase introduces the concept of factoring in the costs of gathering
information (Goldsmith and Eggers, 2004). Prior to Coase, only the hard costs of production
and sales were included in the ledger. Following Coase’s work, organizations began to
make production decisions based on the consideration of whether it cost more to produce
something alone or contract with someone else to produce it for them (Williamson, 1981).
The initial response to Coase’s work was the build up of massive hierarchies that
were equipped to manage all levels of production under one roof (Goldsmith and Eggers,
2004). A lack of accessible information about potential co-producers led many organizations
to avoid partnerships in order to minimize costs. The current supply of information available
to organizations as a result of technological advancement has lowered the cost of
information significantly and made it possible for organizations to benefit from collaboration.
However, new governance networks have the potential to either raise or lower
transaction costs. Participation in networks that lack effective communication and incentives
for continued participation retains high costs of information (even with information
technology). Devolution of responsibility for services to the local level expanded the number
of new entrants into network arrangements. Those networks with large numbers of
unfamiliar new participants are particularly vulnerable to high transaction costs. Limited
interaction with new participants increases the costs of identifying, selecting, and monitoring
partners.
Cross-sectoral networks also bring with them the costs of learning a common
language. Each sector has its own standards for assessment, reporting, and accountability.
Coalescing into a common framework for evaluating progress may involve high costs if the
transition is slow and painful to develop.
23
Many of these new network arrangements are also voluntary, making it particularly
easy for participants to extract benefits from the relationship and then excuse themselves
from the partnership. The costs of creating structures for compliance are compounded by
the costs of monitoring each stakeholder and litigating network failures. These costs drive
some participants away from networks and lead others to look for innovative ways to
collaborate on lowering the price of information.
Sanyal (2006) calls upon Scott’s (1987) concept of “bridging strategies” to suggest
an approach for increasing coordination amongst participants. If a facilitating organization is
able to create vertical integration throughout the network, it may mitigate concerns over the
costs of participation. Integration of resources not only binds organizations to each other,
but also increases direct communication and ultimately may lower the transaction costs
involved in participating in a network.
Networks that are strengthened by greater communication through methods like
vertical integration may lower transaction costs by shortening the distance between
participants. The facilitator may play a vital role in balancing the rational actions of
participants with the collective needs of the network by demonstrating an ability to create
lines of direct communication using a language that each understands.
Goldsmith and Eggers (2004) state that research must figure out how to manage the
diverse relationships of new governance while creating value for participants. Dhanaraj and
Parkhe (2006) add that value may only be created for participants when a stable network is
established that ensures the equitable distribution of costs and benefits to each participant.
This requires a facilitator with a unique set of characteristics. An effective facilitator with a
well-established, positive working relationship with each member of the network has the
capacity to provide stability, encourage communication amongst diverse participants, and
create value for all involved. The facilitator’s proximity to all participants and the level of trust
bestowed upon their relationships may shrink the opportunities for morally hazardous
behavior through repeated dealings and a history of interactions with each member of the
24
network. Facilitated lines of communication may limit the amount of information asymmetry
in the network and make the processes of identification, selection, and monitoring less
expensive for all participants. The reduced costs of the transaction and the comfort level
experienced by new partners are of great value to the network as well as the individual
organizations.
Goal Congruence
The study of goal congruence in new governance research has been largely limited
to how non-governmental network participants have succeeded or failed in aligning their
goals with the goals of government (e.g. Salamon, 2002; Goldsmith and Eggers, 2004).
Much of this work has produced important insight into the difficulties that have manifest as a
result of the institutional factors that make public sector goals difficult to define and achieve.
The next step is to apply those insights to the larger challenge of aligning the goals of cross-
sectoral participants without a dominant force to dictate the central goals of the network.
Goldsmith and Eggers (2004) provide a useful structure for analyzing goal
congruence in networks. They offer three types of goal incongruence that may provide a
framework for identifying the requisites placed on a facilitator to address these issues. First,
it is difficult to establish congruent goals around issues that are addressed differently by
each interest. The challenge for network participants is to focus on the desired outcomes
and not be paralyzed by disagreement over the approach taken by each contributor. This
calls for a facilitator that is able to foster productive dialogue about how each approach
augments the overall progress toward desired outcomes.
Second, networks may set up processes where participants deliver services that
compete against each other. Networks that are not established by a single contract for
performance do not always guard against redundancy or competing interests. A
collaborative effort to address a major issue like transportation may induce participants to
provide competing services. The task for network participants is to figure out a way to
25
create complimentary redundancy rather than predatory competition. A facilitator producing
a competing good or service may have difficulty arguing for cooperation. Facilitation may
require someone outside the market without a vested interest in a particular policy choice in
order to retain the capacity to present the large picture and defuse potentially volatile
interactions.
Lastly, each network is assembled by participants that at some level are driven by a
desire to maximize their own interests. Participants coming together to create and
implement policies to improve conditions, regardless of the issue, will retain some focus on
the impact their participation has on the organization. Dhanaraj and Parkhe (2006) argue
that networks must be structured in a way that allows participants to create and extract
value. They suggest that this may be accomplished by establishing structural inducements
and constraints of the network. The facilitator is challenged to establish a structure that
recognizes the realistic expectations of each participant and offers a medium for
encouraging innovation that will benefit the network as whole, individual participants, and the
issues they are attempting to address.
Principal-Agent
The most vexing issue facing new governance theory is accountability. Government
has always retained ultimate responsibility for goods and services provided to the public.
Even today, despite the fact that the government contracts out or has devolved responsibility
for most programs to non-governmental organizations, the public sector is assigned blame
for program failure. Networks that are assembled without a facilitator that is fully
accountable to the public may not be held to the same levels of accountability. While this
may free networks to innovate in ways not available to the public sector, it also raises
concerns about how networks are held together and who ensures that the public good is
served by their efforts. Approaches to addressing these concerns may come from existing
principal-agent theory.
26
Principal-agent theory was introduced as an approach to understanding the
relationship between managers and workers. More specifically, the theory was introduced to
examine why agents shirked and how principals create incentives and sanctions to minimize
shirking (Wilson, 1989). Information asymmetry makes it impossible for principals to have
perfect information about agents. This has the potential to lead to ineffective hiring,
inefficient productivity, and outright sabotage by the agents. As discussed in the section on
transaction costs, it is prohibitively expensive to attempt to monitor behavior at a level that
would avoid shirking. Instead, principals have turned to contracts to incentivize behavior that
falls in line with the organization (Wilson, 1989).
Kettl (2002) points out that contracts are only as good as the information in them.
Effective contracts require a clear understanding of participants, their motives, goals, and
expected outcomes. Contracts, or network agreements, that are structured by a facilitator
with better information about each participant may be more effective than those that
generically try to mandate compliance through sanctions.
Contracts, however, do not answer the accountability question alone. Scholars have
not come to agreement about who the principals and agents are in new governance
networks. There is important research on the benefits and liabilities of a third party
facilitating a traditionally public function (e.g. Salamon, 2002; Kettl, 2002; Goldsmith and
Eggers, 2004). In each it is noted that while third party facilitation may result in better
services, it also places another layer between the public sector and the service it is
accountable for providing. Research must consider how this affects accountability to the
public.
The simple assumption in the accountability question is that the public will suffer if
government is not ultimately responsible. This may be short-sighted when considering the
fact that local-level networks are more closely tied to the recipients of services. There is
more awareness of network participants at the local level, the public may have better access
27
to them, and the feedback mechanism for praise or complaint may be more abundant than
trying to reach a public agency.
Opening the possibility that networks may be effective at service delivery and
provide a different form of accountability to the public allows research to turn to the question
of compliance within the network. Mandell’s (1984) continuum of power reminds us that
there are degrees of authority within a network. Networks may be facilitated by the
participant with the most power or resources, or the participant that is best-positioned to
build trust, lower transaction costs, and provide the most direct lines of communication to
foster good dissemination of information and create the most effective contracts or network
agreements.
The facilitator without control of resources must demonstrate the ability to corral self-
interested participants in order to pursue a common goal. Economists would point to the
ability of the facilitator to ensure the maximization of benefits to the participants. Economic
theories such as those presented by this model make a persuasive case for selecting a
facilitator based on the ability to create effective collaboration rather than simply allocating
funds. Rational choice theory would suggest that if a facilitator is chosen for these reasons,
participants have incentives to follow their lead.
Wilson (1989) provides a more sociological explanation. Wilson points out that
soldiers do not fight because of the contracts the sign; they fight for honor and to stand
beside their comrades bravely. He reminds readers that even in the Civil War, where
discipline was minimal, soldiers pulled together on the battlefield to support “small group
loyalties.” Most networks that are formed around an important social issue find themselves
bound by a sense of responsibility. Local networks are not simply partnerships for delivering
services and maximizing profits. They are also collaboratives for addressing the most
pressing issues facing communities today. The sense of responsibility that comes with this
mission may lead many of them to comply with the network agreements above and beyond
the level that benefits their organization.
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Measurement of the influences presented in these four theories, when looking at
each sector as a potential facilitator, may prove useful in predicting the type of organization
best suited to facilitate specific cross-sectoral new governance networks. Future research
may identify the variables that would allow scholars to empirically test these influences in
unique communities. This research, however, limits its scope to the institutional factors that
influence a facilitator’s success. In particular, these influences are utilized as a framework
for demonstrating that the public sector has several institutional liabilities that prohibit it from
productively facilitating new governance networks in many communities. At the same time,
community foundations may prove better situated as a regionally-networked philanthropic
organization. Both will be discussed in the following sections.
5. Model Analysis
Public Sector
The public sector’s position at the center of nearly all social programs has been
cemented for almost 70 years by its control of funds. Fluctuations in spending levels and the
location of responsibility have had some impact on the public sector’s role, but it remains the
dominant figure at some capacity in nearly all social change efforts. The devolutionary
policies of the 1970s, 80s, and 90s were meant to remove the public sector from the helm
and replace its massive collection of public programs with a market comprised of
organizations competing to provide services more efficiently. The results have been mixed.
The market has involved a significantly larger number of organizations in social
change efforts. These organizations have brought with them their own organizational
cultures, expectations, and measures of success. New entrants have demanded greater
flexibility for innovation and more agile leadership for the execution of an entrepreneurial
approach to service delivery. While the public sector has benefited from better programs
29
provided at lower costs, it is incarcerated by institutional constraints that prevent it from
answering the call for a new style of leadership.
Evidence of this dynamic may be observed in the network of providers attempting to
address local housing shortages. The elimination of much of the public housing stock has
been justified by the entry of many private sector developers into the provision of affordable
housing. These developers each bring with them designs for providing better housing
alternatives to the public housing offered since the New Deal. Public sector response to
these developers has been less than ideal. Developers have been constrained by building
and zoning codes, restrictions on occupants and methods of payment/subsidy. While the
public sector has attempted to loosen restrictions to allow innovative projects to proceed, the
demands of multiple constituencies have hampered progress.
Networks of organizations working on common issues have developed in order to
pool resources and maximize their impact. The public sector remains an important
participant in these networks as its role continues to be redefined by the changing structures
of new governance. Current change efforts find the public sector in a state of liminality,
where discomfort with new demands is exacerbated by the organizational habits and
institutional structures that have codified over time. These influences have slowed the public
sector’s transition and left scholars and practitioners to make predictions about what public
participation will look like in the future. A systematic analysis of these institutional factors,
using the theories introduced by the model, will inform those predictions.
Resource Dependency
A look at the historical realities of social funding makes a strong case for
dependency on the public sector for resources. Most social change efforts have historically
functioned in a constant state of alarm about the resources available to sustain
organizational budgets. One need look no further than most small nonprofit organizations to
observe the perpetual struggle for resources. The line that delineates closing the doors of
30
operation versus continuing to provide services is frequently thin enough to drive many
organizations toward desperation. This has placed funding at the forefront of importance for
service providers.
Pursuit of program funding has directed most nonprofit organizations and private
service providers to look to the largest sources of funds for support. The public budget has
traditionally offered the most opportunities for funding through contracts and block grants.
The lure of public budgets has pulled many organizations to accept grant dollars with
significant restrictions on their use. Chasing the money has caused mission drift within
many organizations attempting to balance the need for financial resources and the potential
impact those funds may have on programs.
Despite calls for more private support of social programs, the public sector has
remained the largest source of funds by far. The relationship between non-governmental
providers and the public sector continues to be one of resource dependence. Many
organizations have been slow to look away from public grant opportunities as the first source
of funds available. These realities seem to indicate that the public sector will remain the
guiding force for social programs as long as it continues to fund a disproportionately large
portion of the programs run in this country. However, a closer look at the historical trends
over the last four decades offers the potential for a different reality. It is precisely because
organizations are not able to develop a relationship with the public sector outside of resource
dependence that many participants have looked for new approaches to network governance.
The budget cuts that have characterized the last 40 years have moved organizations
to look to alternatives for both funding sources and delivery partners. Organizations have
grown weary of the volatile nature of public budgets due to changing priorities and have
come to demand more control of the funds they raise to run their programs. This has led
many organizations to look elsewhere for support. While the public sector continues to be
the largest source of funds available, regional organizations realize that they may be able to
31
more effectively address local issues by establishing networks of providers that work
together by pooling resources.
These developing networks have been established on the principles of reciprocity,
shared mission, and a commitment to creating mutually beneficial arrangements for all
participants. These goals require a facilitator that is capable of building relationships with
each that are fortified by more than grant dollars. In fact, a facilitator that is viewed solely as
a resource base will bring with it a collection of liabilities that doom the entire network to
failure. The competitive environment fostered by a single grant-making agency will erode
the cooperation within the group that is vital to its voluntary participation and collective
compliance.
The institutional relationships between much of the public sector and non-
governmental partners are virtually immovable. A great deal of literature has been released
recently that attempts to coax the public sector towards adopting new approaches to
leadership (e.g. Osborne and Gaebler, 1993; Klitgaard and Light, 2005; Goldsmith and
Eggers, 2004; Salamon, 2002). However, because the structures of public management
that have developed over decades have found it difficult to adapt, non-governmental
participants have attempted to move on without them. The public sector will continue to see
its role in new governance networks diminish until managers are able to move away from the
policies that have been established based on control of resources.
Transaction Costs
Transaction cost theory argues that organizations will make the decision to partner
or not partner with co-producers based on the cost of information. Network participants will
choose to join and remain committed to a network as long as the costs of participation do not
outweigh going it alone. It is the responsibility of the facilitator to offer the lowest possible
transaction costs to the network by creating the most direct lines of communication to its
members.
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The quality of the lines of communication has a significant impact on the cost of
information. Transaction costs are inflated by uncertainty about partners, an inability to
communicate, and the expense of monitoring agreements. The public sector is ill-equipped
to minimize these costs because of the institutional relationships it has developed since the
New Deal.
It is clear that the public sector has a history with nearly all network participants and
that it has acquired information about most due to iterated interactions through grants and
contracts. However, the historical dependency on the public sector for resources, as
discussed in the previous section, has impacted the quality of information provided by
partners. Grantees have been urged to say what the grant requests and to do it in the
language of the RFP. The information the public sector possesses as a result of these
interactions may be little more than a collection of applications and grant reports that tell the
funder exactly what it wants to hear. While the public sector may be aware of this dynamic,
it does not have the resources or systems in place to create different approaches for
selection, implementation, or evaluation.
The demands of public sector funding have required each non-governmental partner
to learn its language. The government, however, has not been inclined to learn how to
communicate with its partners in their language. Nonprofit organizations have adopted a
dialect when communicating with the public sector that sounds different than that which they
use in-house and with other nonprofit organizations. The private for-profit sector has
adjusted its measures for assessment to match public sector requirements. These
measures remain different than those used for their own purposes.
A network will only be cost-effective if it offers participants the ability to communicate
in their own languages. This requires a facilitator with fluency in each. The language
demanded by the public sector is constraining to all participants and slows the pace of
innovation in the network. It is compulsory that the public sector shows an ability to
33
communicate through approaches unfamiliar to current managers if it is going to adopt a
larger role in new governance networks.
The reinventing government movement of the 1990’s demonstrates the challenges
for public sector managers attempting to adopt an entrepreneurial approach to service.
Government agencies were bombarded with new philosophies about seamless government
and results-oriented programs. Departments were reengineered to adopt business practices
that were to make government agencies more responsive. Many of these organizational
developments failed because adoption of new policies was little more than trying to place a
new language on old processes. Blanket changes of all government agencies were too
comprehensive for agencies that were already running at an efficient level and were not
specialized enough to improve the performance of poorly performing agencies. In the end,
the costs were too high for the public sector to truly learn the language that structured many
of the reinventing approaches.
The inception of public programs was constructed during the phase in Coase’s
theory where organizations built enormous hierarchies to house everything under one roof.
This initial set-up has withered with social reform. Still, it continues to be the foundational
frame of reference for public managers. The inefficiencies that developed through years of
public provision of goods and services have established a standard for monitoring that is not
adequate for new governance networks.
The public sector is too large, has too many constituencies, and too many
fluctuations in priorities to create a system today for monitoring that is cost-effective.
Network success is dictated by an ability to respond to the unique nature of local problems.
Proximity to these communities and familiarity to participants will minimize the expenses
associated with monitoring and lower cumulative transaction costs. Local-level
bureaucracies have been charged with finding new efficiencies by supporting regional
programs. These efforts have been debilitated by increased demands on their services at
the same time revenues have disappeared. Few have demonstrated an ability to adjust to
34
these demands. Until they do, they seem structurally unprepared to capture local
efficiencies by adopting new approaches to management, leadership, and collaboration.
Goal Congruence
The assimilation of multiple parties into a network working toward at least a loose
set of common goals invites several challenges for a facilitator attempting to establish
congruence. The facilitator has the potential to exacerbate or diminish the likelihood for goal
incongruence based on the way it exercises its own interests. The public sector is saddled
by multiple interests that make it difficult to foster goal congruence in a network.
The public sector is made up of elected officials and public managers with multiple
constituencies. The policies that are implemented by public managers may change
regularly, based on the officials in office or voter sentiment. This leaves policies vulnerable
to temporal whims. Long-term projects like local construction of transportation systems are
particularly vulnerable to shifts in priorities.
The public sector has developed its approach to implementation out of sheer
survival. Pressure by principals leads agents to award contracts to a variety of providers.
An attempt to satisfy the demands of multiple constituencies frequently results in awarding
contracts or grants to organizations with competing approaches to addressing the same
issue. The desire to distribute funds for appeasement prohibits the establishment of
networks to work together because providers may be diametrically opposed to each other in
approach.
Funds awarded at different levels of the federalist system also have the capacity to
support competing interest. Limited communication between levels of government or across
jurisdictional boundaries may encourage redundancies that do not serve the common good
in partnership. The ability to invite participants to the table to discuss approaches for
collaboration may be weakened by the fact that the public sector initiated the competition at
inception.
35
The public sector has long recognized the fact that its non-governmental partners
participate with some level of self-interest in mind. It has attempted to create process
measures that may be satisfied regardless of outcomes (Goldsmith and Eggers, 2004).
These measures mitigate the difficulty of evaluating some of the outcomes public programs
pursue and the challenge of balancing self-interest with a collective goal. They have also
created a structure that is evaluated on a level that is ineffective for program improvement or
growth. The public sector has not demonstrated aptitude for identifying goals and measures
in partnership with network participants. The likelihood of productive facilitation will be
enhanced by working together with network partners to structure a common set of
measurable outcomes that may be used to dynamically improve programs with each
assessment.
Principal-Agent
One of the primary reasons for the slow pace of change by the public sector is the
sector’s ultimate responsibility to the public. Multiple combinations of principals and agents
disrupt the transition toward a new approach to service delivery. Workers are accountable to
managers, who are accountable to elected officials, who are accountable to voters. While
levels have been introduced to limit accountability for any of the principals involved, there is
still ultimately a line between citizens and elected officials. This makes it difficult to introduce
another barrier between principals and agents.
There is great concern that relinquishing control of social programs to non-
governmental organizations may jeopardize the safety net offered by public insurance. The
concern has merit. The motives of network participants may differ from public goals. A profit
motive may lead to cost-cutting and result in a lower quality of services to the public. The
inability of many nonprofit organizations to adopt more business-like approaches to
management may create instability in the supply chain. Each concern tempts principals and
36
agents to settle for a familiar system, regardless of its efficacy, rather than something
unknown and with greater risk of failure.
Public accountability provides a comfortable approach. Public contracts, even with
imperfect measures, do offer a moderate source of information for people to judge whether
or not agents are doing their jobs. This approach substitutes a flawed system of
accountability for one that has the potential to offer more relevant measures of outcomes
and more direct lines of communication to participants.
The idiosyncrasies of local problems are better understood by the organizations
most familiar with the community. Contract measures set at the federal or state level may be
totally irrelevant to an issue affecting a particular community. Local networks may identify an
alternative set of goals that directly impact both process and outcome.
A locally-assembled network that is facilitated by an organization with a clearly
articulated mission may offer more accountability to local communities. The traditional lines
of communication between elected official and voters are predictably ineffective. The
processes of writing a representative or calling a district office and receiving a form letter in
return are hardly accountability. Local network participants may be more accessible to the
public. Interested citizens may find these local organizations easier to reach and more
responsive to their ideas. The result has the potential to deliver greater accountability to the
public and a higher threshold for program success.
Review of this collection of variables strongly supports the hypothesis that the public
sector is hindered by institutional barriers to adopting new approaches to leadership. Public
managers are not armed with the resources to adopt the set of skills required to guide new
governance networks. This is not a reflection of aptitude or desire. It is merely a product of
institutional constraints. These results may suggest that new governance networks look
elsewhere for facilitation.
37
Community Foundations
Community foundations offer an alternative to many of the public sector limitations.
Community foundations have a set of structural characteristics that make them more apt to
succeed as facilitators of new governance networks. An exploration of these characteristics
provides a basis of comparison to the public sector and other potential facilitators.
Community foundations are uniquely positioned in communities as fundraisers,
grant-makers, and sources of information and collaboration. The diversity of interests that
characterize these foundations gives them a familiarity with all of the participants in new
governance networks and positions them to earn the trust and commitment of members from
all sectors. Community foundations are not universally large, many are relatively new, and
most do not base their success solely on grantmaking capacity. Some have pointed to these
facts as structural weaknesses of the movement. An alternate view may suggest that they
are well-equipped to facilitate local change efforts precisely because of these characteristics.
Many have not established themselves as primarily a source of funding, most have not been
around long enough to create deeply engrained policies that cannot be changed, and they
are working to create measures of success that depend on elevating the organizations
around them as much as their own.
Resource Dependency
Community foundations have built relationships with partners that are fortified by the
multiple hats that are worn at different times. These organizations may request funds from a
corporation or a donor one day and then serve as advisor the next by helping them identify a
service organization that is effectively dealing with a particular issue in the community. They
may grant money to a nonprofit organization while also working with them on capacity
building and helping to identify alternative sources of funding. They may be able to convene
leaders to discuss an issue with a public official prior to working with that official to identify
strategies for building a coalition to create better policies and approaches for
38
implementation. To each they serve more than one function and have been positioned to
earn a level of trust not possible for other participants.
Critics of the community foundation movement may suggest that as grantmakers
they are fostering dependency on their resources. It is possible that the grantmaking
process may invite the type of one-sided communication described in the relationship
between the public sector and non-governmental service providers. However, community
foundations have not gained prominence in recent years due to their grantmaking capacity.
In 2002, total giving from community foundations across the country made up less than 10%
of foundation giving (Foundation Center, 2004). A growing number of foundations, like the
Humboldt Area Foundation in Northern California, have structured their missions to
compensate for the realization that they will never build endowments large enough to impact
change in their communities through grantmaking. CEO Peter Pennekamp has become a
spokesperson around the country for the idea that community foundations may serve their
communities through the leadership they provide rather than just relying on the grants they
make annually. There is some agreement about the fact that community foundations must
look to alternative resources to gain relevance in local communities. This has been echoed
by several recent studies that suggest that they risk becoming completely irrelevant if they
are not able to adopt a leadership role in the community (e.g. Bernholz, Fulton, and Kasper,
2005; Carson, 2004; Kramer, 2005).
The multiplicity of mission within communities has opened the door for cooperative
relationships with local stakeholders. Few community foundations have positioned
themselves to hold dependence over any organization’s head. Instead, they have carved
out a regionally-focused role that lends itself to bringing people and organizations together to
identify partners, search for alternative sources of unrestricted funding, and create innovative
new ways to address problems. Community foundations provide partners with more options
and enhance their ability to make strategic decisions about resources that benefit their
organizations.
39
Transaction Costs
The exorbitant transaction costs that threaten new governance networks may be
reduced by community foundation facilitation. Community foundations may lower the cost of
information by introducing policymakers, service providers and funders to each other. They
may provide the space to mediate negotiations between new participants. They may also
share with participants the information they have collected over time through their interaction
with other members of the network.
Community foundations are viewed as peers by members of each sector. They
have established relationships that value a reciprocal give and take with partners. Their
position in the community as collaborator has allowed them to catalogue a useful database
of information about the organizations involved in local networks. Their regional placement
creates daily interactions that shorten the lines of communication and arm them with the
knowledge of local problems, who is capable of participating in effective collaborations, and
who may have questionable motives. These attributes are an asset to networks attempting
to guard against moral hazard without running up the costs of information.
Community foundations have also had to earn a level of proficiency in the language
of each network participant. These foundations and the board members who guide them are
made up of stakeholders from multiple sectors. They must earn a tax-exempt status from
the IRS as a 501c3 organization, but should not be characterized simply as nonprofit
organizations. They spend a good deal of time speaking with estate planners and corporate
giving experts, but cannot be categorized as private gift funds. Many work with local public
managers on policy and program creation but they are hardly public bureaucracies. Their
experience with each sector enables them to communicate effectively while also facilitating a
shared language amongst the group by interpreting particular concepts to the network.
The missions of most community foundation have been structured to broadly match
resources with the areas of greatest need in the community (Graddy and Morgan, 2006).
They are charged with the task of fostering local philanthropy and civic engagement
40
(Walkenhorst, 2001). Recognition of this mission in the regions they serve creates a
strategic advantage for community foundations by identifying themselves as the organization
that can facilitate regional partnerships that allow members of the network to both contribute
and extract benefits from their participation. This awareness not only strengthens the
community foundation’s role, but also solidifies commitment within the network by facilitating
a structure where it is less expensive to collaborate with partners than to attempt production
alone.
Goal Congruence
Networks facilitated by community foundations retain memberships with differing
approaches to addressing community problems. Community foundations do not possess a
magic bullet that brings all stakeholders together in agreement on the perfect approach to
creating new policies. They do, however, have the potential to mitigate the threats of
competition and create communication that encourages participants to agree upon an overall
strategy to combat large issues using a diversity of approaches.
Community foundations are characterized by multiple constituencies and set
organizational goals that include measures for each. Community foundations may choose
dominant strategies that range from a focus on donors and fund development to a focus on
community leadership and network facilitation (Graddy and Morgan, 2006). They maintain
the capacity to foster goal congruence despite this range of focus. Success at any of the
dominant strategies adopted by a community foundation is dependent on finding ways to
bring constituents together.
Community foundation partners engage to gain access to a larger community of
organizations working toward social change. Partners approach community foundations for
connection to others. These motives change the nature of responsibility for community
foundations to their constituencies. The fact that many community foundations are not
41
entirely dependent on any of their constituents may prevent decisions that are based on
satisfying a dominant force.
The ability of community foundations to bring multiple constituents from each sector
together may endow them with the power to negotiate amongst competing interests. Many
organizations have come to realize that they may not have the capacity to alter certain social
realities without the help of other organizations. Changes in funding structures and resource
acquisition have moved organizations to consider partnerships and joint ventures. This has
placed competing interests around the same table to discuss the issues that animate each of
their missions. Community foundations may facilitate a conversation that redirects focus
away from the processes of change and toward the overall goals. They may have the
freedom to redirect attention to the outcomes that the network wishes to achieve rather than
being slowed by the approaches taken. A focus on outcomes may shift perception of
redundancy or competing services to that of complimentary programs working toward a
common goal. This shift may allow network participants to return to their own organizations
confident that their organizational interests are being served along side those of others.
The regional focus of most community foundations draws a very clear boundary
around the area served and the constituents to which they are accountable. Network
partners may come from outside the region, but their reasons for joining the network are
primarily to create local change. Policy, implementation, funding, and evaluation decisions
are all made at the local level with a clear understanding of their potential impact on existing
programs. This may minimize competing interests and foster collaboration rather than
proliferation of programs with little consensus on goals.
Principal-Agent
The ultimate measure of success for community foundations as network facilitators
will be accountability. A network that is solidified through consensus, funded by diverse
streams of resources, and offered at a cost that is effective for participants, will still be
42
deemed a failure if it is unable to create mechanisms for accountability to the public and
fellow collaborators. Several factors will impact the creation of such measures.
New governance theory redefines principals and agents on a macro level. All
participants in local networks become agents of the public as principals. Local networks
have the potential to enhance accountability if principals and agents adopt new expectations.
The public must learn to exercise its power as principal through lines of communication that
run directly to each network participant. A policy process that is coordinated with network
participants will initially blur lines of accountability, as no one organization will be elevated to
a position of ultimate authority. However, locally-driven policy creation, implementation, and
evaluation processes will more effectively address regional issues. Principals will need to
adjust to identifying members of the network and their responsibilities. Agents will have to
respond by offering accessible channels for input. Community foundations may leverage
their established relationships with each stakeholder to facilitate these adjustments. The
trust that has been established by community foundations will need to be utilized to smooth
the discomfort that will come from the initial transition away from current habits.
Community foundations will also have to draw on the trust that has been built over
time to facilitate the in-network negotiations that will dictate survival or demise. The micro-
level adjustments for principals and agents are large. Network participants will be more
vulnerable to shirking as they partner with other organizations. Lowering the cost of
information will require community foundations to create more transparency for all
transactions. Their systems of reporting provide public information about their history of
interactions with all participants. Experience with network participants will inform their ability
to suggest approaches to sharing information that will facilitate partner selection, ongoing
evaluation, and result in better accountability. These suggestions will offset concerns about
shirking and put better measures in place for principals and agents to monitor compliance
and success.
43
Incentives for compliance may still be offered through contracts and network
agreements. Community foundations may create more stability in the network by facilitating
agreements that integrate the goals of participants. These contracts will be specifically
crafted with local outcomes in mind rather than using general boilerplates to coerce
behavior. The enmeshment of network goals will be enhanced by the pursuit of locally-
relevant outcomes.
Community foundation facilitation does not remove the public sector from
accountability. The public sector will remain an important participant as a guardian of the
public, a source of legitimacy for the network, and force for compliance. Public funds will
continue to play a significant role and have the capacity to enhance network compliance
without reintroducing resource dependency if they are offered as a resource that augments
network goals rather than dictating them. Community foundations may facilitate the
transition to new governance by keep public managers engaged with cross-sectoral partners
and structuring interactions that do not allow public bureaucracy to slow the pace of
innovation in the network.
This normative institutional analysis of community foundations supports the
assertion that regionally-networked philanthropic organizations may be well-positioned to
facilitate new governance networks. Community foundations offer a solution to the
challenge of structuring local networks capable of collaborating on solutions to the unique
problems that face each community. Community foundations demonstrate that established
working relationships and heightened levels of local information may prove invaluable to
local governance processes.
44
6. Implications and Conclusions
Analysis of the model presented by this paper offers preliminary evidence that the
public sector may no longer be the most effective entity to lead local-level efforts to solve
difficult problems. It also suggests that regionally-networked philanthropic organizations, like
community foundations, may provide a useful alternative to existing approaches to network
facilitation.
The model calls upon four existing theories – resource dependency, transaction
costs, goal congruence, and principal-agent - to compare the public sector and community
foundations. These theories are applied using a normative institutional analysis that
attempts to identify structural indicators of fitness. While these models are not tested
empirically in this paper, the institutional analysis does offer some indication of validity for
these hypotheses. In particular, the analysis shows that the public sector is hampered by a
history of one-sided policy making and implementation that has been defined by control of
resources while community foundations are empowered by the local relationships they have
established as the foundation for their success. These findings have implications for the
study of new governance, public administration, and philanthropic organizations.
New governance theory has had an important role in motivating scholars to consider
new approaches to organizing cross-sectoral community change efforts. The theory has
informed a period of transition that has been defined by the rapid withdrawal of the public
sector from the provision of many public programs and a significant increase in participation
by the private for-profit, nonprofit, and philanthropic sectors. The results of this study open
the door for the new governance networks in formation to foster a cooperative approach to
local change efforts that may be less expensive, more efficient, more stable, and more easily
evaluated if they are facilitated by a regionally-networked philanthropic organization.
Support of this hypothesis should lead future research to consider empirically the capacity of
networks to capture the cooperative benefits proposed by this paper. It should also lead to
45
further exploration of the public sector’s ability to adapt to a role in new governance that
compliments the goals of the network rather than setting them.
Response to these challenges has significant implications for both public
management and public policy. Managers who have been encouraged to adopt new
strategies for empowering non-governmental providers to offer efficient delivery of their
public programs must also be encouraged to allow those providers to influence the choices
being made about public programs. The policy process is significantly altered by a network
that is responsible for creating as well as implementing new programs. Local networks will
absorb functions that have been closely held by the public sector since the New Deal. The
results will permanently alter the public’s expectations of government and change the
methods used for measuring public sector performance.
These results rest on the capacity of regionally-networked philanthropic
organizations to assume the role presented by this paper. Evidence suggests that
community foundations have identified the community leadership role as a goal, but are not
universally prepared to accept the position (Graddy and Morgan, 2006). The expectation
that regionally-networked philanthropic organizations will assume this role shifts the focus for
many organizations that have not established goals of this magnitude. Philanthropic
organizations will have to professionalize their operations in many circumstances to
accomplish the requisites identified to succeed as a facilitator. Future research must
continue to assess the sector’s progress toward redefining its role in local communities and
the ability of these organizations to facilitate new governance networks without sliding to the
powerless end of Mandell’s continuum of power.
It must be acknowledged that the institutional factors used for analysis are great
generalizations and do not account for examples of divergence. The public sector is
analyzed as one entity rather than acknowledging the diversity that characterizes different
levels of government. The analysis is not meant to imply that the public sector has no role in
46
new governance networks. It simply suggests that the role of the public sector in
governance networks must be reevaluated.
Likewise, it does not suggest that all regionally-networked philanthropic
organizations have the balance of mission to accomplish these goals. The potential for
these organizations to succeed at this level is greatly dependent on the individual
foundations and the communities they serve. The challenge is for the philanthropic sector to
acknowledge that it has important competitive advantages that could distinguish it from the
public and private sectors and position it at the forefront of efforts to create local change.
These qualifying statements do not take away from the predictive ability of the
model. Analysis of this model enhances our ability to make recommendations about the
characteristics that must be adopted by new governance network facilitators if they are going
to have an impact on local communities. These results may serve as a call to the research
community to look beyond public sector transition when studying new governance theory.
The public sector will always play a pivotal role in local change efforts, but new governance
networks may never reach their optimal capacity to innovate unless they allow for
organizations like community foundations to assume a much larger role in the process.
47
CHAPTER TWO ENDNOTES:
i This role has been termed differently by each author. For example, Lawless and Moore (1989) call it a broker; Miles and Snow (1986) call it a
strategy maker; Mandell (1984) calls it a go between; Doherty and Mayer (2003) call is a neutral third party or a coach; Barabasi (2004) calls it
a hub or connector; Salamon (2002) calls it a conductor; and Sanyal (2006) looks at intermediary NGO’s.
ii For example: Klitgaard and Light (2005) have assembled a collection of work that examines improving government performance through
better structures, better leaders, and better incentives. Gidron, Kramer, and Salamon (1992) and Salamon (1995) have explored the
relationship between the non-profit and public sectors. Kettl (2002) and Salamon (2002) each look at the choice of tools available to new
governance and the networks used to implement them. Goldsmith and Eggers (2004) offer an examination of the challenges for public
managers in a networked system.
48
CHAPTER THREE: COMMUNITY FOUNDATIONS, ORGANIZATIONAL
STRATEGY, AND PUBLIC POLICY
1. Introduction
Over the past decade, expectations about an expanded role for private philanthropy
in the solution of social problems have increased (see, for example, O’Connell, 1996; Hall,
1999; Goss, 2001). Much of these expectations are centered on the ability of philanthropic
organizations to enhance the capacity of local communities to solve the complex and
challenging problems they face. This community level focus suggests that community
foundations, with their relatively unique attention to place and working relationships with
leaders from multiple sectors, can potentially play a pivotal role. But, little is known about
their capacity to play this role, when they choose to assume it, or the determinants that will
influence their success.
Community foundations are grantmaking public charities
iii
. These public
foundations are funded from multiple sources, including individuals, corporations, other
foundations, and government agencies, and are defined by their focus on a specific
community or geographic region. Although they represent only a small proportion of U.S.
foundations, community foundations make up one of the country’s fastest growing
philanthropic entities. In 2002, there were 661 active community foundations, ranging in size
from the New York Community Trust ($1.7 billion in assets) to many smaller community
foundations with assets less than $100,000. Their combined 2002 assets of approximately
$29.7 billion represented 6.8% of all foundation assets. Their giving, which totaled about
$2.5 billion, represented 8.3% of all foundation giving, and community foundations received
over $3 billion in gifts, or 14.3% of gifts to all foundations (Foundation Center, 2004).
Community foundations have enjoyed a long history in the United States, dating
from 1914 with the creation of the Cleveland Foundation. They have also proven to be a
popular philanthropic form, experiencing substantial growth in number and size over the
49
1980’s and 1990’s. Even with this growth and their unique potential, the role that community
foundations can play in enhancing the capacity of communities to solve the critical problems
they face is unclear, as little empirical work has assessed their capacity.
The call for an empirical assessment of capacity has been amplified recently by
three 2005 reports looking at the future of community foundations and local philanthropy
(see Bernholz, Fulton, and Kasper, 2005; Fulton and Blau, 2005; Kramer, 2005). Bernholz,
Fulton, and Kasper (2005) suggest that community foundations must shift their focus “from
the institution to the community.” They argue that competition may move community
foundations to pursue a more active leadership role in the community. The Kramer (2005)
report also addresses the issue of competition and suggests that community leadership may
prove to be a comparative advantage for community foundations. Fulton and Blau (2005),
echo the call for a leadership role that is characterized by cooperation with other change
agents in the community.
All three of these reports argue that community foundations must assume an
expanded role if they are to survive and thrive in the future. The immediate challenge for the
research field is to create models that may be called upon to assess the capacity of
community foundations to assume this role, and to present findings that can contribute to the
predictive ability of future studies. The existing literature offers only limited help in realizing
these goals.
Community foundations have been the subject of several studies prior to the 2005
reports (e.g., Bothwell, 1995; Walkenhorst, 2001), including their role in community
development efforts (Philipp, 1999; Carman, 2001; Lowe, 2004), and the impact of
diminished government funding and devolution (O’Connell, 1996) on that role. These
studies have focused on community development activities such as community foundation
support of neighborhood-based groups in low income areas, low income housing
redevelopment, and neighborhood revitalization (Lowe, 2004). Few, however, have sought
to examine the internal and external influences on the strategic choices made by
50
community foundations. These choices are important indicators of the potential for effective
community leadership.
Hammack (1989) introduces connections between the circumstances at founding,
the social, financial, and political climate, and the strategic choices made by community
foundations throughout history. He begins with the Cleveland Foundation and proceeds
chronologically through the major influences that have shaped community foundations as
they develop over time. He calls upon the research community to expand its focus and hone
its ability to evaluate impact in order to produce findings that will guide the continued growth
of the field.
Addressing the premise of several of these studies – that foundations are expected
to play a significant role in community development, this study empirically explores the
extent to which community foundations are in fact positioned to enhance the problem solving
capacity of communities. We do this by analyzing determinants of the strategic direction of
California community foundations, and by developing the implications of these choices for
the ability of community foundations to fulfill their expected roles.
The strategic direction of a community foundation refers to its organizational focus
and the purpose of its activities. As such, its choice is an important indicator of the nature
and extent of the foundation’s connection to its community. This study identifies the
determinants of strategic focus in order to provide new information about the capacity of
these philanthropic organizations to participate effectively in community development. We
also seeks to advance the literature, as Hammack and others have suggested, by providing
an empirical model that others may use as a starting point for their work. In the next section,
we discuss alternative strategic directions and develop our model of their determinants. In
Sections 3 and 4, we analyze our model empirically using quantitative and qualitative data
we collected on California community foundations. The policy implications of our results are
developed in the last section.
The Determinants of Strategic Direction
51
The strategic direction of an organization defines its focus, and there are a number
of strategic directions that can be pursued by community foundations
iv
. The set can usefully
be categorized around a dominant focus on donor services versus community leadership
V
.
More precisely, we define 3 major strategic directions upon which a community foundation
may focus --Donor Services, Matchmaker, and Community Leader.
Donor Services. A donor services strategy describes a foundation that is primarily
positioned to build gift funds by serving financial planners and donors. The mission of the
foundation is centered on the donor. Indicators of this strategy include services focused on
types of giving and gift planning; collateral material and webpage content dominated by
information about giving; and a majority of staff time spent on donor relations. Interaction
with nonprofit organizations is limited to grantmaking that is often influenced by donor
wishes. Leonard (1989) suggests that foundations pursuing this strategy will focus on living
donors and will make little effort to alter donor desires, resulting in a high level of designated
or restricted funds. These restricted funds may challenge a community foundation’s ability to
direct resources toward areas of greatest need.
The donor services focus has long been viewed as a compulsory step for
foundations on their way to sustainability. Many have suggested that foundations must
establish endowments before attempting to broaden their mission. This approach is rooted
in a model that measures effectiveness in terms of the grants made to communities. The
realities of the developing cross-sectoral efforts to create change at the local level have
opened new debate about an expanded role for foundations beyond grantmaking, but
community foundations focused primarily on donors may be limited in their ability to establish
productive working relationships with leaders (policy makers, funders, and service providers)
in the region.
Examples of foundations utilizing a donor services strategy are plentiful. This
strategy may be observed in new and old, big and small, urban and rural foundations.
52
The diversity of environments that have bred donor services foundations encourages
research to look for the determinants of this behavior.
Matchmaker. The matchmaker serves as an intermediary between donors – both
individuals and other foundations, and nonprofits. The mission of the foundation is to match
donors’ interests with the needs of the community, and considerable attention is paid to
developing and maintaining relationships with both constituencies. The matchmaker works
with the nonprofit community to stay informed about the needs in the region and then
provides that information to donors seeking direction for their giving. Staff time is about
equally divided between recruiting donors and working with nonprofits.
Szanton (2003) describes this role in his discussion of intermediary organizations or
regranters. The community foundation makes use of local knowledge and experience to
connect donors with effective nonprofits. Reiner and Wolpert (1981) suggest donors rarely
have an understanding of community needs or the opportunity costs of not giving (i.e., higher
taxes), making the matchmaker role vital to directing funds to areas of greatest need. This
role reduces information and monitoring costs for donors, while providing nonprofit
organizations with access to both a broader donor base and a network working to impact the
community.
These foundations facilitate a process of resource allocation that has traditionally
been complicated by large numbers of nonprofits in one area, a lack of clear understanding
about what each nonprofit does, and limitations on donor time and interest. The
matchmaker role is positioned to create a streamlined system for local philanthropy. The
strategy’s focus on matching resources with needs, however, stops short of introducing
community foundations into broader conversations about systemic change and the policies
needed to eradicate the community’s biggest problems.
Community Leadership. A foundation using a community leadership strategy seeks
to be a catalyst for change in the community by participating in, and at times leading,
53
these broader conversations about new policies. In addition to grantmaking programs and
donor relations, the foundation provides policy-oriented information and facilitates
community conversations among residents, policy advocates, and service providers. The
mission of the foundation is centered on responding to, collaborating with, and leading
efforts in the community to create policy changes that combat the most significant problems
facing the region. These foundations define their purpose as larger than the grants they are
able to fund or the endowment funds they are able to build. They assess their success in
terms of the collaborative conversations they are able initiate around key issues. Lines of
communication are opened among nonprofits, donors, community activists, the foundation,
and policy makers. Over 50% of staff time is spent working with nonprofits, community
partners, and change leaders.
It is this strategic focus that much of the literature has described as the ultimate goal
for community foundations (e.g. Lowe, 2004; Carson, 2004; Hamilton, et. al., 2004;
McKersie, 1999), particularly in light of the public sector’s reduced participation in many
community development efforts. The space left behind by the public sector’s shrinking role
may be filled by community foundations that are able to capitalize on their community
contacts, the trust they have developed as a public charity, the resources they may bring
together, and the information they have collected as a result of working with each sector. It
is also this focus that several have suggested must be adopted if community foundations are
to move beyond a community chest tradition and into an active role in the local governance
networks that define communities in the post welfare reform, post devolution, reduced public
budgets 21
st
century.
It is the choice among these 3 strategic directions that we seek to explain. It is
important to note here that we do not believe that a community foundation will adopt one of
these strategies to the exclusion of the others. In other words, we do not view these
strategies as mutually exclusive. Most will likely focus some attention on all three. Rather,
we seek to explain the dominant strategic focus of the organization. The choice is a
54
consequential one. If broad assertions are being made about the potential for community
foundations (and the philanthropic sector more generally) to assume a leadership role, then
a model must be developed for testing the likelihood of such behavior, and this requires
some categorization of strategic focus.
The capacity of a foundation focused on donor services to affect community problem
solving directly is inherently limited. While donors are clearly vital to the process, a primary
focus on fundraising may limit the foundation’s ability to lead the response to important areas
of need. These foundations can serve an important role in expanding the number of smaller
donors participating philanthropically in the region, but their ability to facilitate local public
and private community leaders in conversations about change is limited. This reality may
reduce the ability of communities to solve collective problems, and limit the community
foundation’s own ability to respond to new competition.
In contrast, foundations that are focused primarily on providing community
leadership are developing networks that are well positioned to enhance the problem-solving
capacity of their communities. These foundations may leverage relationships, local
knowledge of the issues, and trust, to bring people together to collectively address problems.
They may also be building a comparative advantage that will strengthen the foundations’
ability to compete with new entrants in the philanthropic sector.
These strategic distinctions are made in order to suggest categories for the field to
use to enable empirical research that will enhance our efforts to understand the role of
philanthropy in community development.
Model
Although much of the scholarly attention to organizational strategy has focused on
business organizations, there is a growing literature on the strategic management of
nonprofit organizations. In a recent review, Stone, Bigelow & Crittenden (1999) analyzed the
findings of empirically based research on strategic management in nonprofit
55
organizations. None of the studies considered philanthropic organizations. Although there
are limitations on our ability to apply either literature to the behavior of community
foundations, there are useful general insights. For our purposes, the relevant work focuses
on the determinants of the strategic decisions made, rather than the process by which the
decision occurs or how the strategy is implemented within the organization
vi
.
Hambrick (1983) defines strategy as a stream of decisions that guide an
organization’s alignment with its environment, and shapes its internal policies and
procedures. Organization theorists have tended to focus on two general theories of the
relationship between strategy and the environment. One view is that strategy is responsive
to environmental changes and thus adaptive. Organizations assess external and internal
conditions and adopt strategies that align the two (Boeker, 1989; Chaffee, 1985). For
community foundations, the nature and extent of the philanthropic community within which
they operate (including both donors and potential partners) are likely to be critical external
conditions. In particular, the absence of a mature donor base or a network of capable
potential nonprofit and philanthropic partners may necessitate a strategic focus on
developing these, or potentially limit the capacity to focus on an expanded role dependent on
the existence of these.
The alternative theory is that a strategy once selected constrains future choice; this
literature emphasizes the inertia tendencies of organizations (e.g., Stack and Gartland,
2003). This inertia may result from the impact of strategy on organizational resources.
Investments in personnel and other resources in pursuit of a specific strategy are likely to
limit the ability of an organization to pursue an alternative strategy (Freeman and Boeker,
1984). For foundations, the impact of a major donor could elicit such inertia. Founding
major gifts are likely to be more defining for the foundation than subsequent gifts.
Organizations by definition must make strategic choices at the time of their founding. As the
organization grows under this choice, Freeman and Boeker (1984) argue that size and age
become evidence of the viability of the initial strategy, making strategic change difficult.
56
Patterns of power, organizational values and resources are all focused on the established
strategy (Miles and Snow, 1978).
In both theories, the age and size of the organization are likely to be contributing
factors. Young organizations on average have less capability in making and implementing
strategic decisions. Small organizations have fewer resources. The effects of these
organizational characteristics however are unclear. Are older organizations set in their ways
(as the inertia theories suggest) or do older, larger organizations have the capabilities to be
more responsive to their environments?
Drawing from both of these theories, our model of the determinants of organizational
strategy is a modified life-cycle theory of community foundation development. We
hypothesize that community foundations generally follow a predictable development as they
age from a focus on building donor resources toward a community leadership role. More
precisely, our model suggests that the young community foundation must, by necessity,
focus on building its resource base. This means developing relationships with donors and
increasing the foundation’s assets. As the organization ages, it develops stronger ties to the
community, and its focus shifts away from primarily donor services and toward community
leadership. Increasing size brings increased flexibility to pursue this strategy. This model
predicts that older, larger community foundations will choose the community leadership
focus, while younger, smaller foundations will choose a donor services focus.
A simple life-cycle model, however, ignores several important environmental
differences that foundations face across communities and over time. There are community
and external characteristics that could mitigate or even dominate the hypothesized life-cycle
effects. The ones that have the greatest potential to alter this pattern are the philanthropic
capacity of the community, the capacity of community partners, external partners, and both
local and national competitors. We consider the expected impact of each.
Communities vary substantially in the extent of their philanthropic capacity. In some,
philanthropic behavior is a tradition; in others, it must be developed. Those with
57
persistent linkages to loyal and informed donors are better positioned to focus on shifting
donor resources and organizational strategy (Wolpert and Reiner, 1984). The absence of a
mature donor base might necessitate a focus on developing these resources independent of
the foundation’s organizational development stage. This process might take decades to
complete and lead to organizational inertia making it difficult for the foundation to change its
focus. Conversely, a community foundation formed in a wealthy community with a strong
philanthropic tradition might be able to entertain a community leadership strategy very early
in its development. We expect two community characteristics to be important indicators of a
strong potential donor community – wealth, and the stability or connectedness of residents to
their community. The donor motivation literature (e.g., Schervish, 1997) supports the
influence of such characteristics on charitable participation.
Community foundations also vary in the existing network of community nonprofits
and other strategic partners with whom they could work. Within-community partners include
nonprofit service providers, religious institutions, other public charities like the United Ways,
and private and public foundations. If there are few potential partners or they lack the
capacity to address the region’s needs, this may limit the ability of the community foundation
to pursue a community leadership or matchmaker strategy, regardless of age or size of
endowment.
External organizations may also be important strategic partners, and some could
have the capacity to affect the mission of the community foundation. Large private
foundations with an interest in the region could, through their funding priorities, alter the
strategic direction of the community foundation. For example, if a substantial proportion of a
community foundation’s giving is through regranting from another foundation, then this may
necessitate a matchmaker focus.
Community foundations face both national and local competitors for donors.
National for-profit providers of donor services, e.g., Fidelity, are competitors for all
community foundations, but their importance has grown over time. Thus, a recently-
58
formed community foundation faces a substantially different competitive environment than
one formed 25 years ago
vii
. Competitors for donor resources also vary by community. For
example, well established members of the community (e.g., a university or hospital) may
constrain a foundation’s donor development opportunities. Thus, important differences in
competitors over time or across communities could alter the strategic choices of a
foundation. Strong competition may increase the amount of resources that the community
foundation must devote to donor services. It could, however, also enhance the early
movement toward community leadership as such a strategy capitalizes on an advantage that
community foundations have over competitors.
We will thus control for the effect these community and external characteristics could
have on the hypothesized life-cycle impacts. Finally, we argued earlier that major gifts,
especially at founding, are likely to limit the future strategic choices of a community
foundation. More precisely, if such events shape the initial strategic focus of the
organization, then this choice may persist over time – thus mitigating the life-cycle effects
outlined above.
To summarize, this model of the determinants of strategic direction (presented in
Figure 3.1) emphasizes the role of 3 sets of variables – the internal characteristics of the
community foundation (organization age and size, and the presence of a defining major gift
at founding), characteristics of the community served by the foundation (extent of
philanthropic capacity, capacity of local partners, and the strength of local competitors), and
the role of external strategic partners and national competitors for donors services.
59
Figure 3.1 Determinants of Strategic Direction in Community Foundations
2. Data and Context
An empirical exploration of our model requires a detailed analysis of a set of
community foundations and the communities they serve. We have chosen to study the
population of community foundations in the State of California. Obviously, such a regionally
based analysis has limitations with respect to generalizability. The State of California has
characteristics that distinguish it from the rest of the country, and these characteristics may
prove influential in the way community foundations function in the state, which must be
considered when attempting to extend our findings to community foundations more broadly.
All members of the sample are participants in the League of California Community
Foundations. Membership in this network creates the opportunity for trends to be initiated by
information disseminated from the League. The role of the League is not dissimilar to that
played by umbrella organizations in other states or by the Council on Foundations at the
national level. The influence of such organizations may be observed in the common use of
language and practices across regional boundaries.
Organizational Characteristics
Age
Size
Major Founding Gift
Community Characteristics
Philanthropic Capacity
Partner Capacity
Local Competitors
External
Strategic Partners
National Competitors
Strategic Direction
60
Despite these limitations, the California sample has much to commend it. The
demographic and geographic diversity of California offers a robust set of communities to
study. This diversity is shared by the state’s community foundations, which vary significantly
in terms of assets (from $100K to over $1B), age (founding year from 1915 to 2001),
strategic direction, and geographic location (urban to rural). This variation allows us to
explore the research question in considerable depth. In part, the richness of the population
results from the disproportionate presence of community foundations in the state. In 1998,
they accounted for 11% of the giving and 20% of the gifts received in the state, compared to
8% and 11% for all U.S. foundations (Ferris and Sharp, 2001). Moreover, California
foundations are a significant and growing proportion of the country’s philanthropic
landscape.
During 2004, we collected data on the 34 community foundations registered as
members of the League of California Community Foundations and the 47 counties they
serve in California. The CEO of each of the 34 foundations was interviewed
viii
. Additional
data on the foundations were collected from the League of California Community
Foundations, 990 PF forms, GuideStar.org, and individual community foundation websites
and annual reports. Socio-economic data on the communities they serve were collected
from census and state data. The resulting data set includes detailed organizational,
financial, and geographic service area information on each foundation.
In order to observe the determinants of organizational strategy in different economic
environments, we collected strategy choices covering the period from the early 1990s
through the early 2000s. This period encompassed a recession (early 1990s), moderate
growth (mid 1990s), and a major economic boom (late 1990s), followed by a bear market
and significant loss of wealth (early 2000s). This period also witnessed considerable growth
in the number and size of community foundations. At the beginning of the period, there were
23 community foundations. By the end, there were 34, a 48% increase. This growth is
comparable to the 50% increase in the total foundation population over the same period in
61
the United States (Renz and Lawrence, 2004). Asset growth from 1997-2002 alone
increased 51% (from $19.7 to $29.8 billion) nationally and 74% (from $2.7 to $4.7 billion) in
California (Foundation Center, 2004).
The data analysis will rely on the quantitative measures of our variables and on the
narrative data from our interviews. We begin with our findings on the distribution and trends
in the choice of strategic direction by California community foundations.
Strategic Choices
Interviews provided the primary data by which foundations were assigned to a
specific strategic direction in each time period. Community foundation CEOs were
questioned about their organization’s current and past strategic directions. These responses
were then compared to mission focus, webpage content, and staff time distribution to check
for consistency.
The resulting patterns in strategic choice are presented in Figure 3.2, with D
denoting a focus on Donor Services, M on Matchmaking, and L on Community Leadership.
The last column denotes the count when more than one foundation followed the observed
pattern.
Of the 34 community foundations in our sample, 3 (9%) started with a community
leadership strategy and 5 (15%) with a matchmaker strategy. The remaining 76% focused
on a donor services strategy as their initial strategic direction. Thus, a focus on building
resources was the strategy of choice for the majority of California community foundations at
founding.
62
Pre 1990s Early 90s Mid-90s Late 90s 2003-04 Count
D D D D D 6
D D D D M 3
D D D M M
D D D/M M L
D D L L L
D M M L L
D L L L L
M D D L L
M M D D D
M M M M L
M M M M M
L L L L L 2
D D D D
D D D M
D D M
L L D
D D 4
D M
D L 2
M M
D 2
Figure 3.2 Observed Patterns in Community Foundation Strategic Choices
To explore our hypothesized Donor Services to Community Leadership transition in
strategy, consider the first 22 shaded observations – those for which we can observe at least
a decade of strategy choices. Of these, 10 (45%) show no change in strategy over the
63
period. These observations argue against the life-cycle progression we hypothesized –
particularly since 5 of these foundations have pursued their chosen strategy for over
30 years. Among the 12 for which we observe changes in strategy, 7 made a transition from
donor services to matchmaker and 6 moved from either donor services or matchmaker to
community leadership. Two moved from matchmaker to donor services during their history,
perhaps recognizing that additional resources were needed to address needs revealed by
the matchmaking activities.
The strongest conclusion that can be drawn from this univariate exploration of
strategy is that most foundations start with a strategy to develop and expand their donor
base through a focus on donor services.
These choices were aggregated for the 4 periods covering the last 14 years, and
Table 3.1 presents the percentage of California community foundations pursuing each
strategy by period. The last row in the table is the number of foundations operating in each
period. This presentation reveals a substantial shift over time in the strategic focus of the
State’s community foundations. The percentage of foundations focused on community
leadership more than doubled from almost 14% in the early 1990s to over 29% in the early
2000s. In the early 1990s, 68% of the foundations pursued a donor services model, 18%
focused on matchmaking, and only 14% focused on community leadership. Today, only
44% are pursuing a donor services model, 26.5% a matchmaker strategy, and over 29% a
community leadership strategy.
Early 1990s Mid 1990s Late 1990s Early 2000s
Community Leadership 13.6% 20.8% 21.9% 29.4%
Matchmaker 18.2% 14.6% 15.6% 26.5%
Donor Services 68.2% 64.6% 62.5% 44.1%
Number 22 24 32 34
Table 3.1 Percentage of California Community Foundation Pursuing Strategies
64
3. Environmental Context
Before turning to an explicit analysis of the determinants of strategic direction, these
decisions must be placed in their broader environmental context. This 14-year period was
characterized by dramatic changes in economic conditions, the development of national
commercial competitors for donor services, and the professionalization of the philanthropic
sector. We consider briefly the nature and likely impact of each.
This 14-year period begins with the recession-laden early 1990s, followed by a
booming economy in the mid to late 1990s, and another economic downturn in the early
2000s. As such, the observed trends argue against a simple relationship between asset
growth and choice of strategic focus. The percentage of foundations pursuing a community
leadership strategy continued to grow in the early 2000s despite the economic downturn,
shrinking endowments, and limited donations. This suggests that factors other than asset
size are affecting organizational strategy.
This same 14-year period saw important changes in the competitive environment
community foundations face in the provision of donor services. A national commercial
market for planned giving developed and flourished, with firms like Fidelity and Schwab
offering a full-range of donor services, including donor-advised funds
ix
. The growth of this
commercial market is illustrated in Figure 3.3 by the growth in assets of the Fidelity
Charitable Gift Fund. This fund, founded in 1992, was the first commercial provider of these
services and remains the largest
x
. Therefore, the trend illustrated in Figure 3.3 is a good
proxy for the increase in national competitors that community foundations faced over this
period
xi
.
65
0
500
1,000
1,500
2,000
2,500
3,000
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Figure 3.3 Fidelity Charitable Gift Fund Net Assets ($ Million)
Data Source: www.charitablegift.org
The impact of this changing competitive environment on organizational strategy is
not obvious. One might expect that the increased competition would encourage community
foundations to focus more attention on donor services. But, this is not what we observe.
Foundations instead may have recognized that it was their community connections that
differentiated them from commercial providers of these services. This recognition may have
led some to focus more on community leadership or matchmaker strategies. This would be
consistent with the recommendations made by the recent work looking at the influence of
private competition (e.g. Bernholz, Fulton, and Kasper; 2005; Knight Foundation, 2005). In
any case, we cannot isolate the direct role of the growth in commercial competition as it was
faced by all community foundations. But, as noted earlier, we expect the impact to differ to
some extent with the age of the foundation
xii
.
Finally, this same period coincided with the movement in the United States to
standardize and professionalize the philanthropic sector – a movement that encouraged
many foundations to explicitly contemplate their strategic direction. Organizations such as
the League of California Community Foundations, the Foundation Center, and the Council
on Foundations assumed a more significant role in training and advising community
foundations, as evidenced by The Council on Foundations’ development of National
66
Standards for U.S. Community Foundations in 2000. Fulltime staffing of community
foundations accompanied the training efforts, moving foundations away from the volunteer-
driven entities of their founding years. Grantmaking processes were formalized, and
foundations began to develop long-term plans for organizational development. Several of
the CEOs surveyed suggested this strategic planning process itself encouraged the
migration toward a community leadership strategy.
Another process that encouraged strategic planning was the reshaping, formalizing,
and training of foundation boards. CEOs reported sending board members to national
conferences designed to introduce contemporary governance strategies to community
foundation leadership. Several of the largest corporate and private foundations awarded
grants to support this endeavor. There are indications of the effectiveness of these efforts,
as 30 of the 34 CEOs reported that their board was at least partially responsible for major
shifts in strategic focus in the last five years. The precise nature of the role of boards in
promoting strategic change is an area deserving of additional study.
To summarize, these important changes in their economic, market, and professional
environment were faced by all community foundations. We will seek to capture differentiated
responses to these stimuli though the organizational variables of age and size. The role of
other differences, especially in organizational leadership, is not captured in our analysis, but
may impact the selected strategic direction.
4. Model Analysis
We empirically analyze our model using both qualitative and quantitative methods.
First, based on the interviews, we explore our hypotheses about the role of major gifts,
partners, and competitors on organizational strategy. Then, we estimate a multivariate
model of the determinants of the foundation’s current strategic direction.
67
Major Gifts
Interviews provided the means by which we explored the role of major gifts in the
choice of strategic direction. We found little support for major gifts as the primary force
behind either a foundation’s original strategic focus or its subsequent changes in strategy.
We asked CEOs if their foundations were formed by charter gifts and if those gifts
set the original mission. In most cases (29 out of 34), the founders set the original mission
to serve the general well-being of the community. For example, one foundation was created
by a donor “to serve the unique needs of her community more effectively;” another to “help
public service organizations care for the sick, improve working and living conditions, provide
recreation facilities, prevent disease, and in general help improve the community.” Such
general missions were not perceived as limiting the strategic choices of the foundation. To
the contrary, their breadth may in fact have enhanced the opportunity for changes in strategy
over time.
We did find some examples that supported a defining role for founding gifts.
Foundations were created to provide free band concerts for the community, to conduct
historical preservation projects, to fund capital projects that serve children and the elderly,
and to award scholarships to local students going to college. Each of these foundations
followed the strategic course set by their founding gift, some for decades, supporting the
inertia hypothesis discussed earlier. These examples, however, proved to be the exception.
CEOs were also asked about major gifts subsequent to the founding of the
organization. No one listed a gift that caused a notable strategic shift. It is important to note
here that CEOs may be hesitant to disclose that they had changed their organizational focus
because of a major gift. The more common assertion was that major gifts had to fit within
and support the existing mission of the foundation. This was illustrated by a foundation that
turned away an eight-figure gift because the donor’s wishes did not fall within the
foundation’s mission. At most, major gifts were reported to enable foundations to enhance
their ability to achieve their existing mission.
68
We also explored the role of Donor-Advised Funds. These funds are housed within
community foundations, but the donor makes recommendations on all grantmaking
decisions. Their growth in importance coincided with the emergence of the venture
philanthropy movement in the 1990s. Venture philanthropists sought to apply their venture
capital and entrepreneurial experience to their philanthropic activities, just as donor advised
funds sought to take a more active role in the management and distribution of their gifts.
Such highly engaged donors clearly have the capacity to affect organizational strategy.
Many CEOs argued that Donor-Advised Funds provided resources to fund projects
that would otherwise be outside the scope of their mission or funding priorities. Others noted
that with the reduced assets and giving associated with market downturns, many
foundations had to limit their giving to Donor-Advised awards. Nearly all of the CEOs
suggested that these funds provided an important opportunity to build a relationship with the
donor, and most hoped that in time they would be able to encourage these donors to direct
their gifts towards areas of need identified by the foundation.
Taken as a whole the interviews did not provide compelling support for a defining
role for major gifts in organizational strategy. Unfortunately, our data were not sufficiently
detailed to allow us to explore this hypothesis quantitatively.
Partners
Interviews also provided the means by which we explored the role of philanthropic
partners on strategic choice. The CEOs were asked about their primary strategic partners,
the nature of those relationships, how they were formed, and their effectiveness. An
interesting pattern emerged. Young, modestly-endowed foundations suggested that
partners were primarily a source of potential funds. They identified their partners as larger
private foundations located outside of their community such as the California Endowment,
Irvine Foundation, Hewlett Foundation, and Packard Foundation. The few local partners
mentioned were also in terms of fundraising efforts.
69
In contrast, older, better-endowed foundations described community-based partners
such as other foundations in the area, nonprofit service providers, local government officials,
and community activists. The foci of these partnerships were described as conversations
about community needs. This difference in the nature of these strategic partnerships is
consistent with our hypothesized movement toward a community leadership focus as a
community foundation ages.
None of the CEOs suggested that their choice of strategy resulted from the presence
or absence of partners within their community. Rather, the partnerships – with whom, and
their nature – seemed to be a consequence of their strategic choices rather than a
determinant. Thus, our hypothesized role for the absence of community partners as a driver
in the choice of organizational strategy was not supported by the interview data. Community
foundations seem to be driven by their own strategic initiative, rather than by responsiveness
to the existing capacity of their community partners.
Competitors
The interviews revealed that CEOs regard their main competitors for donors to be
local nonprofits and universities, and the national commercial providers of donor services
discussed in the last section. They viewed local and national competitors very differently.
National providers of donor services, as expected, were viewed as direct
competitors. Several noted that financial planners received better fees for setting up these
funds than from community foundations funds. Many discussed the need to differentiate
themselves from commercial competitors. Some mentioned establishing better links to the
community to demonstrate a better understanding of need. Others mentioned expanding the
scope of their relationships beyond financial planners and attorneys to ask a broader set of
individuals and community organizations (e.g., Rotary Clubs) to refer donors.
Local competitors were not viewed as such. Many did not want to think about other
nonprofits, the religious community, or the United Ways as competitors. Rather, they
70
talked of developing cooperative partnerships with these organizations. Efforts were made
to communicate with these organizations to find common areas of interest, especially in
difficult financial times.
In both cases, however, competition seemed more likely to push foundations toward
a matchmaker or community leadership strategy, rather than donor services. Whether
thinking competitively or cooperatively, foundations identified community ties as the key to
growth.
Model Estimation
Our model of organizational strategy posits the influence of organizational
characteristics (age, size, major founding gift), community characteristics (philanthropic
capacity, local partners and competitors), and external partners and competitors. We
considered the role of major gifts, partners, and competitors in the qualitative analysis. Here
we analyze quantitatively the role of organizational age and size and community indicators of
philanthropic capacity.
Organizational age (Age) is measured as the number of years since the foundation
was founded; organizational size is measured by assets in millions of dollars (Assets). We
expect older and larger foundations to be more likely to choose a community leadership
strategy.
We use community wealth and stability as indicators of philanthropic capacity.
Wealth is measured as median per capita income (Income) in thousands of dollars. This
measure is a proxy for wealth and will undercount some of its components. Therefore, we
also include the percentage of homeowners (Homeowners), which serves as an indicator of
both wealth and community stability. Finally, we include the percentage of population
change between 1990 and 2000 (PopChange) as a second indicator of stability. We expect
high income communities, with a high proportion of homeowners, and low levels of
population change to be more likely to have mature donor populations, thus allowing
71
foundations greater choice with respect to strategy. The descriptive statistics for these
variables are summarized in Table 3.2.
Independent Variables Mean Std Deviation Minimum Maximum
Age 27.76 24.38 3 89
Assets ($M) 135.23 263.35 .027 1150.0
PopChange 14.94 9.14 1.42 45.06
Homeowners 62.58 8.40 38.4 78.7
Income ($000) 23.59 6.03 15.0 44.96
Table 3.2 Descriptive Statistics
Our dependent variable, Organizational Strategy, is measured two ways. The first,
Strategy, is an ordinal variable assuming a value of 1 for a Donor Services strategy, 2 for a
Matchmaker strategy, and 3 for a Community Leadership strategy. We consider the
hypothesis that community foundations progress through these strategies toward community
leadership as they age and grow in size. The second form, Community Leadership, is a
dummy variable capturing the choice of Community Leadership compared to the other two,
and thus assumes a value of 1 if a foundation pursues a Community Leadership strategy
and 0 otherwise. In summary, we consider the following model:
Strategy/Community Leadership = f(Age, Assets, Income, Homeowners, PopChange)
Our relatively small number of observations limits our choice of estimation
methodology. We consider two approaches. First, we estimate the ordinal variable,
Strategy, using ordinary least squares (OLS). The results are presented in Table 3.3. The
limits on the measurement of the dependent variable are such that these results should be
viewed as suggestive. Nevertheless, the results are consistent with our expectations. This
estimation views strategies as a continuum ranging from donor services to community
72
leadership. The results suggest that older foundations are more likely to pursue community
leadership strategies than donor services. Assets, however, are not a significant
independent influence on the choice of strategy. Among the community variables, only
Homeowners has a statistically significant impact on choice. Foundations servicing
communities with a higher percentage of homeowners are more likely to choose a
community leadership strategy over donor services.
Beta Std error T Sig level
Constant -2.39 1.42
Age .0186 .007 2.764 .010
Assets ($M) .00108 .001 1.397 .173
PopChange -.0127 .016 -.807 .427
Homeowners .0586 .020 2.948 .006
Income ($000) .0046 .032 .142 .888
R
2
42.1
F (sig) 4.08 (.007)
N 34
Table 3.3 OLS Estimation of Strategy
Our second estimation is a logit model of the dummy variable Community
Leadership. This is a more appropriate estimation strategy given the nature of our
dependent variable, but it doesn’t allow us to distinguish between Donor Services and
Matchmaker strategies. The results are presented in Table 3.4.
73
Beta Std error Wald Sig level
Constant -21.915 9.35
Age .077 .036 4.493 .034
Assets ($M) .001 .004 .045 .832
PopChange -.127 .090 2.004 .157
Homeowners .279 .122 5.264 .022
Income ($000) .105 .156 .458 .498
Percentage correct 76.5
-2 Log likelihood 25.092
Chi-square (sig) 16.102 (.007)
N 34
Table 3.4 Binary Logit Estimation of Community Leadership
The logit results are very similar to the OLS results, thus enhancing our confidence
in both. Again, only organizational age and the percentage of homeowners are statistically
significant influences on the choice of strategy for California community foundations. Older
foundations and those located in stable communities are more likely to pursue a role as a
community leader. Conversely, younger foundations, and those located in communities with
a smaller proportion of homeowners, are more likely to be focused on donor services. The
implications of our results are discussed in the next section.
5. Policy Implications and Conclusion
This research has implications for the study of community foundations, and for
public policy. We posited a modified life-cycle model of the strategic decisions of community
74
foundations, which we explored using a combination of qualitative and quantitative methods.
The results provide support for our model, but also suggest avenues for future research.
Our model focused on the role of 3 sets of variables – organizational characteristics,
community characteristics, and external forces – as determinants of organizational strategy.
Even though we were not able to explore all within a single analysis, our combination of
interview and multivariate statistical analyses revealed support for elements of each. In
particular, the roles of organizational age, community stability, and changes in the
competitive and professional environment were found to affect strategic choice.
As expected, most community foundations were found to start with a donor services
strategy. Our analysis of current strategies revealed that older foundations are more likely to
pursue a community leadership role, while younger foundations are more likely to focus on
donor services. This age effect holds after controlling for assets and community
characteristics. Neither endowment size, the presence of a major founding gift, nor the
capacity of community partners was found to be important drivers of strategic choice. Only
our measure of community stability (homeownership) was supported as a relevant
community influence.
We also found support for the role of external forces in the choice of strategic
direction. Since all community foundations were impacted by these forces, we cannot
empirically assess their relative influence. The qualitative analysis of our interviews,
however, revealed an important role for the professionalization of the field and for the growth
in national commercial competitors
Several CEOs suggested that the efforts by membership organizations like the
League of California Community Foundations, the Foundation Center, and the Council on
Foundations to standardize and professionalize the sector encouraged the movement to a
community leadership strategy. They suggested that the common advice, the strategic
planning process itself, and the formalization and training of foundation boards all promoted
the movement toward community leadership.
75
Interviews also supported the role of competitors as key to the adoption of a
community leadership strategy. CEOs, in their efforts to respond to competition by national
commercial providers of donor services, identified enhancing community ties as the key to
growth. This finding is consistent with arguments made in recent papers that community
foundations must move in this direction if they are to remain competitive in today’s
philanthropic services market (Bernholz, Fulton, and Kasper; 2005; Kramer, 2005). Since
the competitive pressures on community foundations are not likely to abate and since this
message has been broadly disseminated in the field, it is likely that even more community
foundations will choose this strategy in the future.
Finally, our model does not directly address the role of individual CEO or Board
leadership in these decisions. Clearly leadership is important. We all know of instances
where leaders facing similar organizational and environmental constraints produce different
outcomes. Our focus here, however, is on the role of these constraints. We believe that
organizational and environmental realities affect the choice of the CEO and Board members,
and also constrain the choice set available to those leaders. We are thus seeking to isolate
the role of these variables, fully recognizing that leadership and the characteristics of the
individuals in leadership roles have an important impact on organizational outcomes. We
leave to others the challenging task of sorting out the importance of leadership
characteristics relative to those of the organization and its environment.
The policy implications of this research are also significant. Over the past 25 years,
the public sector has increased its reliance on the private sector – both nonprofit and
business organizations – in meeting the collective needs of society. This devolution and
decentralization of policy making and service delivery is most apparent at the local level. It
is in this context that community foundations have been called upon to assume a greater
role in local governance, especially in community development. The results of this research,
however, suggest that we must temper such expectations. The large increase in the number
of community foundations over the past decade means that many are very young. Our
76
results suggest that young foundations cannot be expected to have developed the
community connections and expertise that would enable them to be effective in such roles.
Conversely, this work supports the capacity of older foundations and those located in stable
communities to assume a leadership role in community development. Moreover, the
expectation that community foundations, responding to growing competitive pressures, will
turn more quickly than they might have in the past to a community leadership strategy
suggests that more will be positioned in the future to meet these needs.
However, we must be cautious in over-generalizing these results. The sample upon
which our work is based has some important limitations. Even though this work analyzes a
larger number of community foundations than previous studies, work on even larger
populations is needed before we can draw firm conclusions. In addition, the behavior of
California community foundations may be different from those in other regions. In particular,
California’s lower than average rates of home ownership raise questions about our ability to
generalize this finding. On the other hand, the external forces driving increased attention to
organizational strategy -- changing economic conditions, the professionalization of the
sector, and competition in the donor services market -- are common to all U.S. community
foundations.
Despite the limitations of the sample and the need for future research, these results
are interesting. Our life-cycle model of the organizational strategies of philanthropic
organizations offers a promising avenue for new research as we continue to explore the
decision making of these organizations. And, our results counsel caution for our
expectations of an expanded role for philanthropic organizations in local governance.
Community foundations, although uniquely positioned to assume a greater community
leadership role, may not in many cases have the capacity to do so for some time.
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CHAPTER THREE ENDNOTES:
iii Contributions to these nonprofit organizations are tax-deductible under 501(c)(3) of the Internal Revenue Code. Community foundations
must demonstrate broad public support from diverse funding sources to maintain their public charity status.
iv These strategic decisions should be differentiated from the strategic philanthropy decisions receiving attention in the field (e.g., Porter and
Kramer, 2002). This study is concerned with the strategic direction or mission of the foundation rather than strategic grantmaking.
v This categorization is consistent with the distinctions being made in recent work (e.g. Bernholz, Fulton, and Kaper, 2005; the Knight
Foundation, 2005; and Carson, 2004) as well as the strategic planning advice offered by foundation support organizations (e.g., Agard, 1991).
See also Leonard (1989) for a similar categorization of the missions of community foundations.
vi In the Miles and Snow (1978) context, we are concerned with the entrepreneurial problem -- how the organization defines its domain. In our
context, this is the choice between a focus on donors or the community as the targeted service “market”.
vii This may cause those with fewer resources to adopt a different strategy than those who have historically focused on building endowments
first, in order to achieve a comparative advantage over private competitors. The traditional school of thought has been that smaller
foundations have no choice but to focus on donors first. Newer work and anecdotal evidence from interviews with community foundation
CEOs suggest that new and small community foundations may be able to provide community leadership through non-grantmaking activities
such as convening and supporting networks of community leaders.
viii A list of those interviewed and the interview instrument are provided in the appendix.
ix Donor-Advised Funds, which have been offered by community foundations since the 1930s (Luck and Feurt, 2002), became a popular
giving instrument in the 1990s. They provide donors with an immediate tax deduction for donated assets, but also allow them to recommend
how the money is distributed.
x The Fund has made over $4.5 billon in grants between its inception in 1992 and June 2004 (www.charitable-gift.com/history).
xi In 2002, Fidelity’s fund represented $2.4 billion of the $3.4 billion in assets held by the 25 largest commercial donor-advised funds (von
Peter, 2003).
xii Competitive pressures will continue to increase, as the development of new instruments like Donor-Managed funds require strategic
responses. With Donor-Managed Investment funds, donors give their assets to a charity and get an immediate tax deduction, but can
continue to manage the assets for up to 10 years (Silverman, 2004). This instrument will provide donors with more investment control than is
available with Donor-Advised Funds. This is notable since the added control that donors enjoy in commercial DAFs compared to those
housed in community foundations is believed to offer a competitive advantage to commercial funds (von Peter, 2003).
78
CHAPTER FOUR: GRANTMAKING AND NONGRANTMAKING MEASURES
OF RESPONSIVENESS IN COMMUNITY FOUNDATIONS
1. Introduction
Regionally-networked philanthropic organizations are poised to assume a central
role in local problem-solving. Their placement within communities as fundraiser,
grantmaker, and community resource center strategically positions organizations like
community foundations to lead regional efforts to identify the most pressing issues facing a
community, facilitate cross-sectoral conversations about alternative approaches to
addressing these issues, craft collaborative plans and coordinate the implementation of a
strategic vision for the community, and assess the effectiveness of the plan after
implementation. Adoption of this modified policy-making process has the potential to
significantly alter local-level governance and the way community development occurs. It
also raises important questions about the implications of this new model for the community
and the community foundations leading the process.
Community foundations have been the focus of much research in recent years. Two
studies have analyzed the institutional merits of community foundation leadership versus
public sector leadership (Morgan, 2007), and the determinants of strategic direction within
community foundations (Graddy & Morgan, 2006) in order to define a role for regionally-
networked philanthropic organizations and identify the constraints that may slow the
adoption of this role. The results have shown that community foundations do have strategic
advantages bestowed by their placement within community networks. However, they are
also constrained by a set of internal and external variables that may slow or prevent
universal adoption of the community leadership role. These competing results demonstrate
both the promise and realities of the community foundation movement. While much
agreement exists about the theoretical potential for these organizations, there is little
79
evidence to suggest that the field is prepared to assume a leadership role in regional
governance networks.
A central question for new governance research is how to assess accountability
when the public sector is not directing local problem-solving. If community foundations are
to institutionalize themselves at the center of new governance processes, then they must
provide accountability for the network. Evidence of accountability requires a structure for
measurement to determine levels of responsiveness to the region served by a community
foundation.
There is little agreement within the field about how to measure responsiveness.
Much of the existing literature points to a focus on the size of assets or endowments (e.g. St.
John, 2006), the structure and composition of the board (e.g. Burroughs, 1999; Guo &
Brown, 2006), percentage of discretionary giving (e.g. Guo & Brown, 2006), internal process
efficiency (e.g. Orosz, Phillips & Knowlton, 2002), and adherence to a new set of National
Standards (e.g. Lilly, 2004). Each of these variables offers insights into measurement of
responsiveness, but none of them present an approach that accounts for both the
grantmaking and nongrantmaking activities demanded by the community leadership model.
The challenge for community foundations in a more competitive market today is to develop a
method of measurement that empirically demonstrates their effectiveness in facilitating
cross-sectoral networks responsible for significant change in a region.
This research analyzes existing literature and applied examples to explore what
variables may be tested to measure responsiveness in future studies. Reliable
measurement is dependent on an enhanced definition of responsiveness as a product of
community leadership. The following sections explore the questions posed by prominent
scholars attempting to move the field toward a broad understanding of community
leadership. Existing measures are reviewed within the context of a call by several scholars
to adopt a new orientation toward measurement. A preliminary set of potential hypotheses
for future research is offered based on a review of the literature. Current models for
80
measurement are analyzed to identify the unifying approaches that run through each. An
adapted model is introduced to structure analysis of two original case studies. These case
studies are presented and analyzed to generate a second set of potential hypotheses drawn
from applied scenarios. Conclusions and implications are discussed in the final section of
the paper.
The Call for New Measures
A 2005 Berholz et al report called the philanthropic sector to attention by suggesting
that the future of community foundations is dependent on the field’s ability to move toward a
model of community leadership that differentiates community foundations from other private
funds that are working on behalf of their communities. They point out that private fund
managers such as Fidelity offer the same basic donor services offered by community
foundations, often at a lower cost and with greater efficiency. Competition from these funds
has demanded of community foundations that they demonstrate a unique value to their
communities if they wish to remain relevant. These demands have forced community
foundations located in competitive markets to consider why they exist, who they serve, how
they are changing communities, and how they place a value on community leadership
(Bernholz et al, 2005). The future viability of community foundations as a major player in
new governance may rest on the ability to answer these questions. However, approaches to
measurement that would adequately arm community foundations with the data they need to
answer these questions remain elusive.
Several scholars have attempted to distinguish community foundations from other
donor service providers by asking similar questions. Carson (2004) argues that the future of
community foundations rests on the decision to define themselves either as a field or a
movement. He states that a field is preoccupied with measuring market share, professional
development, cost efficiency, and best practices while a movement looks at what can be
achieved and how (Carson, 2004). Existing measures of responsiveness show a clear
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bias toward assessing community foundations as a field. These measures do little to
differentiate community foundations from other donor service providers. Critics are
beginning to point to the need for new measures to offer a more comprehensive view of
community leadership as a movement in order to identify the behaviors that are unique to
community foundations.
Current Measures of Responsiveness
Introduction of new measures of non-grantmaking responsiveness has been slowed
by an inability to define inputs and outcomes that may be tested empirically. The challenge
of empirically measuring the long-term impact of a community foundation’s efforts has led
many to measure other indicators that may influence responsiveness. Analysis of these
variables, as they are measured today and as they may be measured differently by future
research, may advance the generative goals of this study by ensuring that new hypotheses
are informed by the strengths and weaknesses of existing approaches.
Asset Size. Scholars and practitioners for years have looked to size of assets and
endowment as a key indicator of responsiveness. Until recently, there has been some
agreement around the idea that a larger pool of assets would enable community foundations
to serve the community as a leader by delivering a more expansive grants package to the
region. It follows that without significant assets, a community foundation is ill-prepared to be
a leader in the community. This theory supports a life-cycle approach to development,
where community foundations must begin with a focus on donor services to build the
resources needed to eventually adopt a community leadership role.
Recent literature has begun to analyze life-cycle model assumptions by placing
community foundations into one of the dominant strategies (donor services or community
leadership) over time and then testing longitudinally to see if asset size is a significant
determinant of strategic choice (Graddy & Morgan, 2006). Results from the Graddy and
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Morgan (2006) study found no evidence of asset size affecting strategic decisions. While
these results are only a preliminary investigation of strategic decisions, they do suggest that
the assumptions about asset size are vulnerable to critique.
St. John (2006) argues that accumulation of assets placed in a large operating
endowment may distance foundations from their communities by enabling them to function in
isolation from donors in the region. This hypothesis states that the existence of large
endowments, funded by fewer donors, may predict less responsive behavior by a community
foundation. It follows that measurement of responsiveness should look at the number and
breadth of donors rather than the size of assets.
St. John’s hypothesis runs counter to several studies that suggest that the
accumulation of unrestricted assets may be necessary for the community foundation to be
able to respond to areas of greatest need in the region as opposed to individual donor
wishes (Carson, 2004). Guo and Brown (2006) suggest that discretionary funds are vital to
a community foundation’s ability to stimulate risky initiatives that may otherwise go unfunded
by risk-adverse donors interested in more easily measured projects. Discretionary funds
may be measured in terms of size, or in terms of types of grants made. The number of
restricted grants made versus those that may be directed by the foundation to target areas
may provide an indication of the foundation’s ability to respond to the community (Cohen &
Krehely, 2005).
The divergent conclusions of these two theories are the result of differing
assumptions about the community served. St. John’s (2006) theory suggests that a primary
form of connection to the community is through donors while the second theory suggests
that community foundations must reach a position of freedom from donor demands in order
to serve the community that benefits most from social change (Carson, 2004; Guo & Brown,
2006; Cohen & Krehely, 2005). The distinction between the theories is observable in a
dominant focus on facilitating donor interests versus facilitating community change. The
measurement of each would differ as a result of focus. One would be judged on the
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ability to direct assets to areas of greatest need in the community while the other would
measure the acquisition of assets, number or breadth of donors and how donors are served
(Guo & Brown, 2006).
Both theories are constructed on the assumption that community foundations impact
the regions they serve primarily through the grants they provide. An expanded view of
community leadership also looks at the non-grantmaking behaviors of a foundation and how
these activities impact a community. The inclusion of non-grantmaking behaviors in the
measurement of responsiveness changes the way assets are tested. As Bernholz et al
(2005) point out; asset size does not measure success. The ultimate measure of success
for a community foundation is the long-term advocacy it provides to the community.
The more relevant focus within the question of assets may be the process of
accumulation and how this pursuit distracts a community foundation from community
leadership. Carson (2004) suggests that those community foundations which adopt donor
services as a dominant strategy are more likely to focus on building assets than they are
building community.
Exploring the process of accumulation of as opposed to the size of assets may lead
to several potential areas of research to guide measurement in the future. New research
may consider the possibility that the percentage of time spent on fund development will be
negatively related to participation in regional problem-solving. It would follow that the
percentage of discretionary funds held by a community foundation will be positively related
to the amount of time spent leading community development efforts.
One potential area of focus to test both of these hypotheses is the field of donor
advised funds (DAFs). Community foundations have found DAFs to be a significant area of
growth in recent years. The engaged donor movement has encouraged many donors to
pursue this form of philanthropy. These funds are also most closely offered by private fund
managers like Fidelity. Many community foundation leaders suggest that a donor advised
fund is a way to engage donors, build trust with them over time, and eventually educate
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them about the areas of greatest need in the community (Graddy & Morgan, 2006). Others
suggest that these funds encourage community foundations to fund grants that may have
little impact on social change in the region (Cohen & Krehely, 2005). Kramer (2005) goes a
step further by suggesting that community foundation operating deficits actually rise with an
increase in the number of donor advised funds. He points to this evidence and other
supporting data to challenge the assertion that donor advised funds increase the viability of
the community foundation model. The variance in information offered about DAFs illustrates
the cal for more research about the impact of these funds on community foundations.
Results of new research may show that the percentage of DAFs in a community foundation’s
asset pool indicates connection to the community. Therefore, the number of Donor Advised
Funds in a community foundation’s asset pool may have a positive relationship to the
amount of time a community foundation spends on donor services.
Board. The composition of boards of directors provides an additional area of
potential research for responsiveness studies. Three areas of focus have dominated much
of the existing research on boards; board demographics, performance, and accountability.
Burroughs (1999) suggests that the diversity of a board may impact the breadth of
giving priorities within a foundation. He goes on to suggest that, in the absence of diversity
on a board, local affinity groups representing diverse interest may encourage foundations to
consider a broad selection of community needs. Several others have demonstrated that the
lack of diversity within many boards has perpetuated the status quo within community
foundations. Carson (2004) points out that boards have historically been assembled around
a small group of local elites. These board members have reached a position of power in the
community due to the current state of the region. As a result, board members may actually
prefer the status quo to significant changes, ensuring that their interests, or the interests of
their friends, are not jeopardized. This phenomenon would appear to conflict with a
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community foundation’s mission if it sets out to create social and economic change in a
region.
Board diversity has largely been measured in terms of cultural and ethnic
composition. New studies are beginning to also include socio-economic range, age, and
profession. As research continues to pursue an approach to measuring how board
composition reflects the communities it serves, future studies may also look at geographic
distribution to ensure that areas of service have representation on boards to take advantage
of grassroots connections.
Board diversity may demonstrate that demographic representation that is closely
aligned with the community served may be positively related to a community foundation’s
response to underrepresented populations in the region. The impact of board diversity may
be measured in the future by comparing changes in board composition and changes in
priorities (grants made, establishment of area of interest funds, and announcements of major
strategic initiatives) of the foundation. This type of longitudinal analysis may offer new
evidence of board demographics affecting responsiveness.
Such evidence may be strengthened by a more in-depth understanding of board
performance. To date, little is know about the role of boards in major decisions guiding
community foundations (Orosz, Phillips & Knowlton, 2002). Performance measures for the
board have focused on securing resources and oversight of the fiscal efficiency of the
foundation (Guo & Brown, 2006). There may be discontinuity between the call for
community foundations to shift strategic direction beyond donor services while continuing to
limit the measurement of board performance to its fundraising and asset management
capacity.
Community leadership may require a board to take a more active role in identifying
and implementing strategic initiatives through the foundation. Participation in these
initiatives may be evident in the existence of a committee structure that works closely with
foundation staff on programs or sanctioning by the board of periodic strategic planning
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processes that assess placement of the community foundation in the region, relevance of
programs, and future direction of foundation efforts. A well-defined committee structure with
active participation by the board may be positively related to a strategic vision for the
community offered by the board.
Adoption of such board activities has been slowed in recent years by a national
focus on organizational governance and oversight. The Enron and Worldcom scandals, as
well as a few well publicized news stories about the mismanagement of funds within large
national nonprofit organizations, have served as a wake-up call to sitting board members.
Demands for more fiscal accountability from the public as well as government regulators
have urged many boards to pursue training about their legal responsibilities. National
membership-based organizations such as the Council on Foundations have responded with
a series of offerings for new and existing board members. Many of these seminars have
focused on accountability, liability, and better stewardship. For example, the Council on
Foundation’s web site lists 2007 offerings including a training session called Building Strong
and Ethical Foundations, which proposes to “increase understanding of legal practices and
to develop and encourage adherence to high ethical standards in grantmaking.”
This national focus on accountability has professionalized many of the systems
implemented by community foundations and their boards. It has also diverted the attention
of community foundations from measuring the impact of their programs on community
change by shifting focus to the processes of distribution and management. A content
analysis of leading training programs may demonstrate the overwhelming bias toward board
focus on governance and accountability. These results could then be measured against
board participation in such trainings to test the direction a board is pursuing. Board
attendance at conferences and trainings focused on traditional governance issues may be
negatively related to board participation in creation of strategic initiatives for the community
foundation.
87
National Standards. Nowhere is the focus on operational and fiscal accountability
more evident than in the National Standards movement. National Standards have been
applied across the country in an effort to standardize practices within community foundations
and build competency in the field (Lilly, 2004). Few would argue with the need for advancing
the competence of community foundations across the country. There is some debate,
however, about the focus of the National Standards and what they truly measure. Lilly
(2004) argues that these standards may do little more than emphasize differences in size.
The Council on Foundations (Council on Foundations, 2005) suggests that National
Standards “guide sound policies and accountable practices, distinguish the field from others,
and build the capacity of community foundations.” Compliance with the standards requires a
comprehensive set of documents demonstrating proficiency in seven categories. Within
these seven categories, only one refers to community leadership. The five areas of
reporting for community leadership are focused primarily on grantmaking guidelines, with
one section suggesting that community foundations work to identify community issues and
act as a convener to address the issues in the community. Limited emphasis on community
leadership is both a product of commitment and ability to measure. National Standards
strive to produce measurable guidelines that may be satisfied by any foundation following
the rules. Expanding the community leadership requirements may challenge those creating
the standards to find new approaches to quantifying results.
Adoption of these standards may in fact systematize the operations of community
foundations, but they do little to set community foundations apart from their private sector
counterparts. These standards must be analyzed within the context of their origin. They
have been created under threat of government regulation on charitable giving and respond
to demands for greater accountability. The questions for future research to address may be
whether adherence to the standards directs community foundations away from community
leadership by draining the time and energy of small staffs away from a focus on the
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community. It may be the case that time spent satisfying national standards reporting is
negatively related to time spent on community leadership.
Internal Process Efficiency. Measurement of staff time and internal grantmaking
processes guides many efforts to establish a structure for testing responsiveness today.
Foundations attempting to demonstrate efficiency have documented staff capacity and
competence, grantmaking priorities, how programs are designed, and the decision-making
processes within the organization (Orosz, Phillips & Knowlton, 2002). Results have then
been distributed to boards and donors to show how effectively the community foundation
operates.
This type of assessment has further turned the focus of community foundations
inward. Mechanistic measures have been substituted for broad assessment of positioning in
the community. The inspiration for much of this measurement has been that of convenience.
The absence of acceptable indicators of responsiveness has driven community foundations
to look for process that they can define and measure. These measures have provided
minimally adequate information in the past. However, the demands of community leadership
continue to force community foundations to look elsewhere for evidence of impact.
Current literature provides an important starting point for responsiveness studies.
The critique of existing measures offered by contemporary scholars demonstrates the
limitations of current research. New research may begin by adapting the measures most
familiar to scholars to date. Introduction of a new set of variables, such as those presented
in table 4.1, may initiate conversation about advances in the field. Shifting the focus of these
measures may provide a first step toward a new orientation toward measurement.
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New Orientation toward Measurement
The call for a shift in focus has been given voice by several sources in recent years.
The California Endowment (2005) has stated that foundations must move away from simply
counting the number of people served by grants. A more complex assessment must test for
“relevant changes in service recipients’ attitudes, awareness, and behaviors” (Guthrie et al,
2005). The process indicators that have characterized success in the past should give way
to the types of outcome indicators that are going to say more about the impact of a
foundation’s efforts on the long-term future of the region.
Percentage of time spent on fund development is negatively related to participation in
regional problem-solving.
Percentage of discretionary funds held by a community foundation is positively related to
the amount of time spent leading community development efforts.
Number of Donor Advised Funds in a community foundation’s asset pool is positively
related to the amount of time a community foundation spends on donor services.
Demographic representation that is closely aligned with the community served is
positively related to a community foundation’s response to underrepresented populations
in the region.
A well-defined committee structure with active participation by the board is positively
related to a strategic vision for the community offered by the board.
Board attendance at conferences and trainings focused on traditional governance issues
is negatively related to board participation in creation of strategic initiatives for the
community foundation.
Percentage of time spent satisfying national standards reporting is negatively related to
time spent on community leadership.
Table 4.1 Literature Review-Generated Hypotheses
The challenge of developing new indicators is in defining what success looks like.
Moving from a focus on operational efficiency to a focus on participation in a cross-sectoral
network charged with creating significant change in a region requires modified assumptions
about success (Bernholz et al, 2005). Several broad questions have been presented to
begin the transition to a new approach to measurement.
St. John (2006) points out that community foundations offer people of modest
means the opportunity to contribute to a pool of resources that may impact the common
90
good. She then follows by questioning how community foundations decide what represents
the common good. Her question calls for a survey mechanism that engages the community
in a conversation about key issues facing the region in order to set priorities and an
assessment tool to measure the impact of programs once implemented.
Orosz, Phillips and Knowlton (2002) focus more directly on how foundations may
establish a level of agility that allows for them to increase accountability while also adding
value to philanthropy. The issue of adding value to philanthropy may be of primary concern.
Community foundations are not universally prepared to answer those who ask what value
they add to philanthropy. In order to do so, they must figure out what the problem is to which
community foundations offer a solution (Bernholz et al, 2005). Community foundations must
position themselves as an integral participant in the cross-sectoral networks that define
regional development. Measurement of success in this endeavor requires organizations to
shift focus toward the community and the interdependent organizations responsible for
creating change (Bernholz et al, 2005).
Model
This research has been informed by five existing models constructed to begin the
process of developing measures to answer the questions posed by those calling for a new
orientation toward measurement. Orosz, Phillips & Knowlton (2002) have published their
Effectiveness Framework; Buchanan, Bolduc, & Huang (2005) offer Three Measures for
Performance; the California Endowment (2005) presents the Capacity Building Benchmarks;
Hamilton, Parzen, & Brown (2004) discuss Five Aspects of Changing-Making Roles; and
Bernholz et al (2005) put forth their Building Blocks of Community Philanthropy Strategy.
Each model provides target areas to frame data collection for measurement. While
these models are accompanied by some suggestions for approaches to measurement (table
4.2) they have stopped short of delivering a comprehensive design for gathering evidence of
success in the target areas. The basic constructs of these existing models may be
91
informative for analysis that attempts to generate hypotheses to guide measurement in the
future.
Proposed Measures Author
Measure “interim outcomes” – giving an indication of the prospect
rather than actuality of success (e.g. meeting with official, media
coverage, etc.)
Burkeman, 2005
Measure targets or sensible adaptation to changing environments? Burkeman, 2005
What contributes to policy change (short term goals) like increased
legislator awareness vs. number of fliers sent to legislators?
California
Endowment,
2005
How did the grantees’ work improve the policy environment for
change?
California
Endowment,
2005
How do you engage community organizations in larger civic
engagement effort?
Cohen &
Krehely, 2005
Do the allocations of community foundation resources represent
stated priorities?
Finberg, 2002
Number of staff vs number of grants affects the quality of
interactions and in turn, responsiveness
Huang, 2006
Multi-year grants may be more efficient and allow nonprofits to be
more effective
Huang, 2006
Individual meetings with grantees before and after grant decisions
are made may lead to better communication
Huang, 2006
Are grantees surveyed to measure responsiveness? Buchanan,
Bolduc, &
Huang, 2005
Do we influence others to fund grantees? Buchanan,
Bolduc, &
Huang, 2005
Table 4.2 Sample of Proposed Measures of Responsiveness
The continuity of these five models (table 4.3) is found in the identification of three
primary functions for foundations; communication with the community, participation in
networks comprised of local stakeholders, and the provision of resources (information or
monetary) to leverage the acquisition of further resources for sustainable change. These
types of leadership functions most directly represent the activities that differentiate
community foundations from competitors (Hamilton, Parzen & Brown, 2004). They highlight
the strategic advantages of a regionally-networked philanthropic organization, account for
92
grantmaking and non-grantmaking behaviors, and include the ability of foundations to
leverage resources to generate additional support in order to multiply the impact of their
activities.
Effectiveness Framework
Orosz, Phillips & Knowlton (2002)
- Grantee Relationships
- Grantee Capacity
- Grantee Results
- Sustainable Social Change
Three Measures for Performance
Buchanan, Bolduc, & Huang (2005)
- Quality of interactions with staff and grantees
- Clarity of communications
- Expertise and external orientation of foundation
Capacity Building Benchmarks
California Endowment (2005)
- Developing relationships with elected officials
- Increased number of participants in network
- Cultivate partnerships with advocacy groups
- Build database and policy analysis skills
Five Aspects of Change-Making Roles
Hamilton, Parzen, & Brown (2004)
- Contributing ideas and information
- Fostering strategic connections
- Expanding resources devoted to change
- leveraging systems change
- Promoting performance
Building Blocks of Community Philanthropy Strategy
Bernholz et al (2005)
- Building and sharing knowledge
- Brokering regional collaboration
- Shaping community discourse
- Nurturing new philanthropists
- Building community capacity and leadership
- Advocacy for policy solutions
Table 4.3 Existing Models
Research on community foundations using models like these is just beginning to
reach a level of sophistication necessary for an accurate picture of the state of the field to
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be presented for critique. The challenge for scholars is rooted in the ability to structure
inquiries that may measure both the recognized indicators of responsiveness (for example,
number and types of grants awarded) and the more subtle activities utilized by community
foundations to impact more ambiguous goals such as ability to respond to the common good
(Guo & Brown, 2006). It is these more subtle activities that are of interest to the model
analysis.
This research presents a set of case studies informed by interviews with the CEOs
of two community foundations in the State of Michigan. Converging lines of inquiry and
corroborated evidence are assessed using additional data collected from interviews with 27
CEO’s of community foundations in Michigan, recent articles published by the Council of
Michigan Foundations about the community foundations’ efforts, and from the foundations’
websites and published materials. Multiple sources of evidence offer a more robust
framework for presentation of the reported activities (Yin, 2003).
Both of these foundations have engaged in ambitious initiatives designed to lead
monumental community and economic development efforts in their regions. The exploratory
structure analyzing these efforts is framed by the three broad functions presented in the
model. Results offer a descriptive framework for analysis of innovative programs being lead
by community foundations. The processes outlined by each case study may serve as
benchmarks, against which other foundations may be compared. Most importantly, the
analysis of these case studies using the adapted model presented informs the generation of
a series of additional hypotheses on which to build new models for testing measures of
responsiveness.
Conclusions and implications are drawn both from the individual studies as well as
the aggregated results of the series through cross-case analysis. Sample selection has
been based on two foundations engaged in activities representative of the behaviors
modeled for investigation. Each presents uniquely illustrative evidence of the functions
required by the model. The exploratory nature of the research lends to a more flexible
94
research design allowing modifications to accommodate unexpected conclusions (Yin,
2003).
To summarize, hypotheses for the measurement of grantmaking and non-
grantmaking responsiveness in community foundations will be generated through analysis of
case studies presenting evidence of exemplary communication with the community,
participation in local networks, and the ability to leverage resources to enhance the pool of
support for sustainable change in the community.
2. Data and Context
The State of Michigan has much to commend it as the location of the research
sample. Community foundations in the state have a storied history of community
engagement, dating back to the establishment of the Grand Rapids Community Foundation
in 1922. 64 community foundations and 58 geographic affiliates cover all 83 counties in the
state. Total assets in the state were slightly above $2 billion in 2006, with over $104 million
granted annually (Council of Michigan Foundations, 2006). All community foundations
actively participate in the Council of Michigan Foundations, an umbrella organization that
advises, trains, and supports foundations in the state.
The economic history of the state lends further support to the value of the sample.
Michigan is an industry-based state that has long found itself vulnerable to fluctuations in
manufacturing. Regions have experienced significant boom and bust with the establishment
and demise of factories located within their borders. Economic development has largely
been the product of luring factories to regions to employ large numbers of unionized
workers. A series of international developments including labor outsourcing, production
cuts, and greater competition have led to a prolonged downturn in the economy. Many
factory-based regions have struggled for the last three decades to find new models for
sustainable economic development.
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The strength of industry and union leaders in the state and a long history of limited
government participation have rendered the public sector less influential in regional
development efforts. Regional initiatives have been slow to develop without an obvious
organization to facilitate cross-sectoral networks at the local level. Communities which were
once led by a dominant industry in the region have seen a leadership gap develop with the
departure of industry and limited funding response by the state. The dearth of new
governance leadership has inspired communities to search for organizations capable of
leading processes that may create vision for the region. This presents an opportunity for
regionally-networked philanthropic organizations to assume a leadership role in the
community.
Four state-wide influences have shaped the progress of regional problem-solving in
Michigan. The first two, the C.S. Mott Foundation and W.K. Kellogg Foundation, have each
taken an active role in supporting regional growth through grantmaking initiatives that
attempt to catalyze further support at the local level. This research’s survey of 27
community foundation CEOs in Michigan found that the ten foundations identified as
community leaders all received funding from the Mott or Kellogg foundation. These
foundations are largely responsible for the establishment and viability of a community
foundation in every county. Growth in the number of counties served by community
foundations from 28 in 1986 to 83 in 2006 is the product of the resources offered by these
foundations (Council of Michigan Foundations, 2006).
The third influence empowering regional problem-solving has been the Council of
Michigan Foundations. The Council serves as a governing body, trusted adviser to
foundations in the state, lobbyist for pro-philanthropy public policy, and fundraiser for
community foundations. The Council maintains regular communications with foundations,
disseminates relevant literature, and offers training and consulting to members. Its influence
was easily observed during data collection. For example, conversations with community
foundation CEOs were conducted within a year of the Council sending copies of the
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Bernholz et al (2005) article to all community foundation leaders. The frequency with which
the article was mentioned made it clear that leaders directed attention to information
supplied by the Council.
The Council has been particularly successful garnering state government support for
community foundations. While government agencies have not been significantly involved in
local problem-solving for some time, a series of partnerships offered through the State of
Michigan have armed the regionally-based community foundations with greatly needed
resources to guide local efforts.
A state-wide tax credit has been made available to donors who make contributions
to the operating endowments of Michigan community foundations. The generation of
operation endowment funds has removed some of the fundraising burden for community
foundations wishing to dedicate staff resources toward community leadership as opposed to
donor services. The state has also structured local partnerships between community
foundations and the State Housing Development Authority (MSHDA) to address regional
homelessness rates. Tobacco settlement dollars have been directed to community
foundations to support their efforts to improve the quality of life for seniors and youth in their
counties. Lastly, state legislation encourages public schools, libraries, and local government
to house designated funds for their benefit at local community foundations (Council of
Michigan Foundations, 2006). Each of these initiatives has provided valuable resources for
Michigan community foundations and initiated a collaborative structure that demands cross-
sectoral partnership.
From November 2005 through August 2006, hour-long interviews were conducted
over the phone with the CEOs of 27 community foundations in Michigan. Interviews were
structured by a series of 25 questions looking at strategic models, organizational
characteristics, the role of major donors, social venture partnerships, and community
characteristics. Analysis of these data led to the selection of two community foundations to
be presented as case studies for this research. An additional phone interview was
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conducted with each of these foundations in February, 2007 to discuss in depth the
inspiration and implementation of the regional initiatives they have led in their counties.
The initiatives led by these foundations (Grand Rapids Community Foundation and
the Manistee County Community Foundation) are exceptional and not perfectly
representative of the organizational activities of other foundations in the state. They were
selected, however, for their exceptional qualities. The activities of these foundations are to
be analyzed for the purpose of presenting conclusions about foundations engaged in the
types of endeavors promised by optimal community foundation participation. Hypotheses
that may guide future research concerned with responsiveness must be drawn from
foundations exhibiting behaviors that exemplify community foundations as community
leaders.
3. Model Analysis
Grand Rapids Community Foundation: Leveraging Sustainability in Grand Rapids
An October, 2006 News Release by the Council of Michigan Foundations announced
that the Grand Rapids Community Foundation (GRCF) awarded $128,000 in grants to local
neighborhoods in Kent County. The grants were made through a Commercial & Economic
Development Fund (CEDF) designed to support community development projects in the
region (Council of Michigan Foundations, 2006). $128,000 in grants to local organizations is
neither easily dismissed as trivial, nor trumpeted as a systems-changing grant cycle.
However, the story of the CEDF’s establishment and the implications for the community
foundation and the region are worthy of consideration.
The 2006 grant announcement is most appropriately traced back to a 70
th
Anniversary conference hosted by the community foundation in 1992. The community
foundation’s CEO, on the job for five years and armed with a background in social change,
pushed the board to use the 70
th
Anniversary celebration as a forum for engaging
community leaders in a conversation about the most pressing issues facing the region.
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She knew that the community foundation had built a solid reputation in the county and that it
was poised to establish itself as a community leader. While the board was tentative in its
support for the transition, it ultimately approved the initiative because of a desire to assume
a leadership role that would distinguish the community foundation from the growing number
of organizations competing for support.
200 community leaders participated in their Perspective 21 survey. The results led
the community foundation to partner with survey participants to address a number of issues
facing youth in the region. The stakeholders began by addressing child abuse and then built
on the strength of their partnerships to tackle other youth-related problems in Kent County.
The lessons from the 70
th
Anniversary survey have guided the community foundation’s
progress for the next 15 years; community engagement is a productive approach to
identification of important issues as well as a vital strategy for Involving a network of state
and local leaders in efforts to combat these problems.
Leadership through community engagement has initiated additional partnerships
addressing environmental issues, low-income housing, issues facing seniors, economic
development, and the strengthening of community neighborhoods (Grand Rapids
Community Foundation, 2006). These initiatives inspired the foundation in 2000 to formally
adopt a community leadership model of operations that would position the foundation to lead
significant social change in the county by serving as a resource center for local leaders and
organizations, hosting community forums, leveraging support to fund innovative projects,
and leading initiatives and advocacy efforts through grantmaking and nongrantmaking
activities.
The 2000 announcement about community leadership was followed by a second
announcement that year about a partnership with the Michigan State Housing Development
Authority (MSHDA). The partnership at inception was a regranting arrangement that
provided the community foundation with funds to support bricks and mortar projects
improving facades in historic business districts. The state established MSHDA to
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capitalize on the grassroots links to the community offered by regionally-based community
foundations like Grand Rapids. The unintended byproduct of the project was the multiplier
effect that was made possible by leveraging funds to build additional outside support.
The community foundation discovered early in its partnership with MSHDA that
these funds could be leveraged to lead a more comprehensive approach to economic
development through job creation, workforce improvement, affordable housing, and
revitalization of business districts. The foundation shifted measurement of success in the
MSHDA partnership beyond tracking the processes of regranting their funds for bricks and
mortar. New goals were set to track how much money could be generated in addition to the
MSHDA funding and how many partners could be recruited to join the project. The
foundation approached private foundations, private donors, city governments, and grantee
organizations to join their efforts to stimulate meaningful economic development in the
region. The results over the course of seven years show that the community foundation has
leveraged $1.1 million of grants through its CEDF to generate over $8.6 million in funding for
projects.
The community foundation’s inspiration for how to leverage seed funding was
largely attributed to a relationship with a grantee organization. The Executive Director of an
organization that specialized in funding historic preservation projects taught the community
foundation how to access new sources of funds instead of simply looking for more private
donors. The community foundation learned how to utilize tax credits, financing, and other
grants to fund projects. Instead of focusing solely on private donors, partnerships were
established with local churches, banks, businesses, and public agencies.
These lessons may have gone unrealized without an open channel of
communication with partner organizations. Information generated through communication
with network partners has been vital to efforts to identify, understand, and respond to
developing needs in the community. Information gathering has occurred informally through
community forums and open discussions as well as more formally through surveys and
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funded projects. The most innovative manifestation of these efforts is the community
foundation’s partnership with the Johnson Center for Philanthropy at Grand Valley State
University.
GRCF has granted $1.5 million to the Community Research Institute at the Johnson
Center to generate an ongoing city, county, and state-wide environmental scan of
community data. These data generate information that helps the foundation assess the
needs of the region, make projections about problem-solving trends, and measure the
impact of programs (Council of Michigan Foundations, 2006). Data is also offered to the
community as a resource that may be utilized by all network partners addressing social
change. Housing these data at the community foundation has solidified the foundation’s role
in the region as a resource center.
Adoption of a more sophisticated community leadership model and dedication of
significant funds to projects without an obvious impact measurement, like the Community
Research Institute, have forced the community foundation to search for new methods of
evaluation to demonstrate responsiveness. The foundation has grappled with ways to
address questions about making the connection between grant outcomes and social
outcomes, showing that community leadership activities affect donor behavior, measuring
short and long-term impact on the community, and assessing the impact of grants on
community change. These questions have inspired an entirely new approach to
measurement.
The Grand Rapids Community Foundation has developed over the course of six
years a patent-pending evaluation program designed to offer a business-like model to
measure community impact. The model has been designed and tested to measure the short
and long term results of initiatives in the communities they serve. The professional
development of the program has occurred through an iterative process of testing outcomes
measurement. They have found measures for funding outcome evaluation relatively easy to
create while measures for social change have been more difficult to address.
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Grantee organizations have become partners in the creation of the program. Each
grantee is trained to use the program for reporting. Their participation and input has
assisted the community foundation to modify the program to look at projects over a long time
horizon in order to assess social outcomes. Together, they hope to institutionalize an
innovative approach to measurement that may be disseminated throughout the country. If
successful, implementation of a measurement package may contribute to significant
advances in the way assessment occurs in foundations.
Initiation of programs like the Commercial and Economic Development Fund at the
Grand Rapids Community Foundation was the result of a string of lessons that guided the
foundation’s strategic planning for the future. A history of communication with the
community has generated a series of successful cross-sectoral programs impacting regional
problem-solving. Relevance for the field was exhibited by the foundation’s ability to assume
a leadership role in the community through grantmaking and nongrantmaking initiatives.
Adoption of the community leadership role has had several unexpected implications
for the foundation. Concerns about the impact of reducing staff focus on donor services and
grantmaking have gone unrealized. A dominant focus on community leadership has
differentiated the community foundation from other organizations in the region. Leadership
of cross-sectoral networks has provided exposure for the foundation and its initiatives. A
diverse pool of new donors has become engaged, leading to significant growth in assets
over the last ten years.
A board that was pulled reluctantly into the leadership role has transitioned into one
of the primary mechanisms for connection to the community. The foundation has provided
training for board members (through Board Source) that has reshaped the way governance
is viewed within the organization. Governance focus has been redefined to explore board
leadership rather than liability. Meeting agendas are structured by the strategic initiatives
identified by the community foundation. Open discussions about new issues facing the
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region are then conducted in the final session of each meeting. These discussions
frequently provide a call to action for future initiatives to be adopted.
Finally, the foundation learned that community leadership did in fact demand new
measures to assess responsiveness. Reporting the number of grants made and the
processes adopted by grantees provided limited information to test the impact of community
foundation initiatives. The foundation realized that an evolving structure for measurement
must be developed to make the connection between community foundation programs and
long term social change in the region.
Manistee County Community Foundation: Envisioning the Future of Manistee
The Manistee County Community Foundation’s (MCCF) first ten years could be
characterized as humble. A group of dedicated friends who met for breakfast each week
passed the hat to raise funds for small grants to the community. After nine years of
operations, the foundation had $131,000 in assets and limited direction for the future. That
would all change in the twelve months to follow.
1996 welcomed a fulltime CEO to run an organization with a new board in place and
recent membership in the Council of Michigan Foundations. A fulltime CEO with a
background in nonprofit organizations, a newly professionalized board, and participation in
the Council had an immediate impact on the foundation. Leaders were encouraged to
redirect the foundation’s efforts to address the limited viability of the organization as the
result of dwindling resources. The next seven years were dedicated to building an asset
base that the foundation felt was necessary prior to undertaking a more ambitious
community leadership role in the region. These years also facilitated new relationships with
donors and community stakeholders that would serve them well as the organization
continued to develop over time.
Successful acquisition of moderate assets positioned the foundation to ask a new
set of questions just after the turn of the century. The President of the board advocated
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for an open dialogue with stakeholders to begin to answer questions such as; how do we
know we are making the right grants? How do we review the way we are spending money in
the new economy? How do we most effectively spend our limited funds to help the needy
community? How do we figure out what the needs and issues of the community are and
what do we do to fix them?
These questions began a 16 month project that would reshape the way local
problem-solving was conducted in Manistee. Conversations with local leaders were initiated
to talk about what needed to be done in the community. The board President and
foundation CEO found unanimity across sectors. All suggested that the county needed a
comprehensive visioning process to identify issues, structure plans to address them, and
coordinate cross-sectoral networks to contribute the resources needed to solve the
problems.
The board of MCCF approved a visioning process that would engage leaders from
all sectors in a program designed to create a strategic plan for the county. Envision
Manistee County commenced in 2003 with the internal goals of identifying challenging
issues and problem-solving strategies while also raising the profile of the community
foundation, raising additional funds for projects, and developing more philanthropy in the
region.
700 people from Manistee County participated in the project as members of
workgroups or as participants in citizen input forums. Input was solicited at public meetings,
through an Envision Manistee website, at stakeholder meetings, and through perception
surveys (Envision Manistee County, 2004). Six workgroups were assembled around quality
of life topic areas
xiii
. Each workgroup was charged with identifying issues facing the region
and strategies for addressing them. Definition of problems and identification of policy
alternatives was then followed by the creation of a mission statement for each group. A
series of community forums were hosted by the community foundation to collect data on
their findings.
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Workgroups were co-chaired by volunteers with limited experience facilitating
projects of this magnitude. The community foundation provided funds for an outside
consultant to assist with workgroup facilitation to ensure that all activities were of value to the
process. The consultant also conducted county-wide surveys and interpreted the data to
create a fact book on the region. The fact book offered baseline data on each topic area for
longitudinal assessment of progress every five years.
The community foundation realigned its giving strategies based on results from
Envision Manistee. All subsequent applicants were asked to write proactive grant proposals
that addressed issues identified by the process. A menu of endowments were planned to
reflect the needs of the community, as defined by Envision. Funding for these endowments
continues to be a derivative of the process.
MCCF’s leadership of the Envision process attracted the attention of organizations
like the Kellogg Foundation, the Paine Family Foundation, the Oleson Foundation, the State
of Michigan, and the local United Way. Kellogg’s $300,000 grant to MCCF in 2006, to
enhance the quality of life for people in the county, was the direct result of the Envision
process (Gallagher, 2006). Others attributed their support to the foundation’s bold
leadership of the project. New partnerships, such as a joint grantmaking project with the
United Way, were established to capitalize on the community foundation’s proven placement
in the community as a leader.
The United Way partnership illustrated the potential for organizations, which
frequently are positioned in competition with each other, to jointly benefit from cooperation.
One of the results of new partnerships was an increased level of support for all participants.
Collaboration in the Envision Manistee Process enhanced the visibility of each organization
involved. These results countered any concerns about competition limiting the viability of the
project. The networks that were established enhanced the level of total philanthropy in the
region and offered an opportunity for all members to further their missions through
participation.
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Measurement of the impact of Envision Manistee will be conducted every five years.
The ongoing process hopes to analyze new data against the original baseline data to look
for indicators of progress. Variables have been identified to help each workgroup look at
success across impact areas. It is expected that progress in one area, such as arts and
culture, may be related to progress in another area, such as economic development.
The greatest challenge for measurement is in quantifying progress on difficult issues
like bullying in elementary school. In this example, the foundation has improved on existing
statistics by creating additional surveys for K-4
th
graders about bullying. These data help
them define the problem, offer grants to address the issues, and then measure intermediate
and long-term improvements in the community. This process is being replicated across a
number of issues such as human services and environmental degradation.
The community foundation’s success as a leader of the Envision Manistee process
was attributed to MCCF’s reputation as a neutral partner in the community. The foundation
offered a safe table around which leaders may gather to discuss regional problem-solving.
The inclusion of participants in the entire process cultivated partnerships that have carried
beyond the data collection phase and well into the implementation of program strategies.
These partnerships have lent credibility to the foundation and cemented its role in the
community as a leader of social change in Manistee.
Cross-case Analysis
Communication. Both foundations credit the ability to communicate with grantee
organizations, existing donors, public officials, community residents, local leaders, and
prospective donors for much of their effectiveness. Each called on existing relationships
built over time with local stakeholders to increase participation. These relationships
established a level of familiarity and trust that provided assurance to participants that the
processes of engagement would be legitimate venues for sharing opinions, ideas, and
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resources. A proven track record in the community certified the foundations’ ability to
guarantee that action steps would follow data collection.
Each foundation chose to utilize survey processes to connect with constituents.
These processes were structured to assess the needs of the community, identify potential
solutions, and recruit partners to implement new policies. Survey respondents were
compelled to participate by processes that ensured conversation beyond answering a set of
questions. All of the engagement activities involved a survey process that was accompanied
by a conference, workshop, community forum, or submission and answer mechanism.
These follow-up meetings were where partnerships were established, policy alternatives
were envisioned, and commitments to the initiatives were confirmed.
The strength of the community foundations’ communication was only as strong as
their commitment to realigning internal strategies to match the outcomes of survey
processes. Each example demonstrated the importance of linking survey outcomes with
internal processes. New grant programs and submission requirements were aligned to fit
the demands of newly identified problems in the community. Meeting agendas and staff,
board, and volunteer job descriptions were redesigned to match community demands with
organizational strategies. These changes, among others, demonstrated an external
manifestation of the community foundations’ commitment to implementing the goals of the
survey processes. Partners may have been more reticent to fully participating in program
implementation without these visible adaptations.
Three potential hypotheses to explore communication may be generated by the
lessons observed through these case studies. Future research may test if survey process
participation (response and commitment) will be positively related to the age of the
foundation. Age has been identified in previous research to determine strategic direction in
community foundations (Graddy & Morgan, 2006). In the context of the proposed
hypothesis, age may serve as an indicator of either visibility in the community or level of
established relationships with community stakeholders. Results may provide information
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about the ability of young foundations to conduct similar projects. While not an outcome
indicator, age as a variable is an important predictor of responsive behavior.
Further research may also test whether the level of survey response will be
positively related to the existence of a well-publicized follow-up structure that invites further
conversation. The Manistee Foundation board President pointed out that some members of
the community who were invited to participate initially resisted because of skepticism about
the opportunity to give meaningful input and the ability of the community foundation to
implement new plans. Demonstration of a comprehensive plan convinced these participants
to set aside concerns and contribute to the process.
Finally, the number of partners participating in program implementation after the
survey process may be positively related to the visible realignment of strategies within the
community foundation. Proving this hypothesis may show that realignment serves as a
demonstration of the community foundation’s commitment and lends credibility to the
implementation phase. Results would link internal realignment with all information gathering
processes to ensure that community foundations considered the entire policy making
process prior to engaging constituents in a survey.
Cross-sectoral Participation. The examples offered by the case studies demonstrate
that leadership in new governance networks is dependent on the ability to engage partners
from a cross-section of the community. Even in a state like Michigan, where two private
foundations make up a significant percentage of the total dollars granted annually,
partnerships must be established to pool resources, share information, and cooperate on
implementation.
The community and economic development programs led by Grand Rapids and
Manistee extended far beyond funding. The number of partners committed to the projects
impacted the viability of the efforts. Many communities, like Manistee County, have been
dependent on a small number of decision makers for years. New models for community
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development are being constructed to spread responsibility across sectors to ensure that the
plan is responsive to community needs and sustainable. These partnerships allow
participants to share information about performance measures and lessons learned through
years of specialized work in the community. This type of information improved the
community foundations’ ability to respond to the unique needs of the communities they
served.
The community foundations benefited greatly from their roles in the partnerships by
positioning themselves as the facilitators of ambitious cooperative efforts. Exposure to
leaders in the community raised the visibility of the foundations and enhanced their ability to
push for social change. In both of the foundations studied, taking a leadership role in the
community resulted in significant gains in fundraising totals, despite designating less time for
donor services. These relationships also endowed community foundations with another
valuable asset in the community; information. The lessons learned from these partnerships
may be offered to other organizations as a resource for change. Community foundations
may then broker that information to solidify their role in the community.
Much has been written about the value of community foundations bringing leaders to
the table to discuss change, but little has been offered to measure impact. Future research
may choose to look at the outcomes of these conversations for evidence. Were new
initiatives established and implemented? Were responsibilities assigned to members of the
conversations? Is the community foundation responsible for holding each partner
accountable for their commitments? How did taking a leadership role affect the development
efforts of the foundation?
A set of hypotheses may guide this exploration. First, the connection between
accomplishment of goals and the commitment of partners must be assessed. Scholars may
consider testing the hypothesis that accomplishment of project goals (amount of funding
provided, completion of construction, or implementation of program) will be positively related
to level of commitment (staff time dedicated or funds donated / generated for the project)
109
of each partner. It would follow that level of commitment (staff time dedicated or funds
donated / generated for the project) of each partner will be positively related to the number of
formal participants in the partnership. Both of these may measure the impact of cross-
sectoral participation.
Funding outcomes may be measured by considering if the range of issues funded
(number of grants made to areas of interest) is positively related to the diversity of
participants (industries, positions, missions). This hypothesis measures both the
grantmaking behavior of the foundation and the connection between the participants
involved and the types of grants offered. It is ultimately intended to test response to
participants rather than funds granted.
Leverage. Most community foundations in the United States operate without
adequate resources to independently affect major social change in their regions. The
community foundation model was created with this reality in mind. All community
foundations are established to function as pooled funds or community chests. The asset
bases of community foundations vary significantly, just as they did between Grand Rapids
and Manistee. However, each was still compelled to multiply its efforts by leveraging a
recognized position in the community as a neutral source for change.
The Michigan community foundations appeared to leverage their reputations for
several reasons. The ability to multiply resources drew more partners to projects. More
partners participating in the projects lent credibility to the effort. The foundations were able
to draw on their credibility to raise awareness, solicit ideas, and secure additional funding.
These additional resources improved the likelihood of creating sustainable change and
expanded the scope of plans for future projects. Finally, responsibility for outcomes was
spread across the network as a result of the intertwined tasks that defined the initiatives.
The ability to leverage committed resources to secure additional commitments may
prove to be amongst the most important tasks for community foundations to master. The
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search for differentiating characteristics could most likely stop at the ability to pool resources
more effectively than any other entity (for example: Fidelity, private foundations, public
sector) in the region. Serving as the depository of information, ideas, and pooled funds
positioned the Grand Rapids and Manistee County community foundations to lead
community and economic development programs in their regions that were far beyond the
scope of their individual capacities and outside the realm of possibility for any other
organization serving their communities.
Hypotheses guiding measurement of the ability to leverage for sustainable change
build on the previous two sets of hypotheses. Number of participants in the network and
opportunity for meaningful contributions to problem solving are key variables. A beginning
point for measurement may test whether the number of participants in an initiative is
positively related to the amount of funding generated in addition to the seed funding of the
program. Number of different sources of funding will be positively related to the type of
participation made available to all partners. Based on these results, the size and scope of
initiatives announced will be positively related to the number of participants involved in the
program.
4. Implications and Conclusions
An exploratory study of the measurement of responsiveness in community
foundations produced several findings worthy of future consideration. A review of the
current state of the field demonstrated how far measurement needs to advance to produce
relevant conclusions about responsiveness in today’s new governance networks. Existing
measures remain skewed toward process variables that offer little information about
engagement or outcomes. The literature presented strong arguments for improving the
quality of measurement by redirecting the focus of research to explore how community
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foundations may provide value to their regions by leading social change efforts. This new
research focus demanded hypotheses to test grantmaking and nongrantmaking behaviors.
The hypotheses introduced through analysis of the measures presented in the
current literature offer a starting point for efforts to redefine the variables that contribute to a
broad understanding of community foundation responsiveness. The set of variables most
frequently used for measurement today were adapted to assess how these factors influence
the behavior of foundations as community leaders. Results from these measures may not
only improve the capacity of community foundations to demonstrate responsiveness, but
may also provide community foundations as a field with the evidence they need to
demonstrate a competitive advantage over other gift funds attempting to compete for local
philanthropy.
Use of existing measures to assess the activities of the Grand Rapids and Manistee
County community foundations would completely omit relevant analysis of the social change
efforts these foundations have led in their communities. Such omission would limit the
foundations’ ability to report on progress and would minimize the amount of additional
support they would be able to generate for ambitious community and economic development
programs. These applied examples demonstrated the call for new research on
measurement.
The second set of hypotheses offered in the cross-case analysis presented more
informative areas of focus for future research (Table 4.4). Most of the hypotheses generated
through analysis of the case studies are intermediate indicators of responsiveness. They
attempt to turn the focus of measurement outward to assess how foundation activities draw
connection to other organizations in the region. The processes to be tested are engagement
processes rather than internal management processes. The redirection of focus links
community engagement to the level of response offered by the community foundation
through community leadership. Each hypothesis is limited in the information offered about
responsiveness if tested in isolation. However, testing all of these together, as proposed
112
by the model, may offer a complimentary analysis of response to the community. It is
expected that results will offer a more robust understanding of the subtle behaviors that are
uniquely endowed within community foundations.
Table 4.4 Case Study-Generated Hypotheses
Part of the difficulty in identifying measures of responsiveness is in defining the term.
Community foundations are charged with serving entire regions. It is rare to find consensus
about community need and more infrequent to find consensus about how to address
problems facing a region. These realities demand that future studies clarify to whom
foundations are to respond (for example: donors, nonprofit organizations, corporations,
public agencies). The answer is most likely all of the above, in which case research must
adopt a battery of tests to assess responsiveness across constituencies.
The hypotheses generated by this research place much weight on the collection of
baseline data through a survey process. Baseline data offer the opportunity for pre-test
Survey process participation (response) is positively related to the age of the foundation.
Level of survey response is positively related to the existence of well-publicized follow-
up structures that invite further conversation.
Number of partners participating in program implementation after the survey process is
positively related to the visible realignment strategies within the community foundation.
Accomplishment of project goals (amount of funding provided, completion of
construction, or implementation of program) is positively related to level of commitment
(staff time dedicated or funds donated to project) of each partner.
Level of commitment (staff time dedicated or funds donated to project) of each partner is
positively related to the number of formal participants in the partnership.
Range of issues funded (number of grants made to areas of interest) is positively related
to the diversity of participants (industries, positions, missions).
Number of participants in an initiative is positively related to the amount of funding
generated in addition to the seed funding of a program.
Sources of funding are positively related to the type of participation made available to all
partners.
Size and scope of initiatives announced is positively related to the number of
participants involved in the network.
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and post-intervention studies. Difficult to measure social change may only be observable
through a long-term analysis of outcomes. This requires all organizations and donors
demanding information about impact to adjust their expectations about the amount of time
required to observe measurable change. It may also lead to the reevaluation of the amount
of time required to create social change. Such reevaluation may move foundations and
donors to adopt multiple-year grant policies to support organizations addressing long-term
change.
The Grand Rapids and Manistee County community foundations each understood
the challenge of presenting short and long term evidence of progress. Their efforts to satisfy
existing reporting demands while struggling to quantify the work that does not fit within that
structure demonstrate the period of transition in which many foundations function today.
Recognition of these shortcomings led Grand Rapids to create its own patent-
pending system for measurement. As more software packages are developed to test
responsiveness, scholars will need to keep a trained eye on the types of inputs they are
measuring. These packages hold great promise in the potential for systematizing reporting.
They are also vulnerable to replacing one set of inadequate measures with another. The
success of these programs in offering a new system to measure responsiveness will rest on
the ability of scholars to find appropriate proxies for social change indicators. This research
has attempted to introduce the topic of proxies, but has not offered a conclusive design for
future testing.
Other limitations of the research are evident. This research does not adequately
analyze the role of CEO and board leadership in community foundations. The samples
provide evidence of the impact these positions may have on community foundation
programs, but do not offer a set of hypotheses to empirically study the impact of their
leadership. These leaders have a demonstrated ability to influence the direction of their
114
community foundations. Research must continue to search for evidence of influence in
order to make connections between those indicators and the responsiveness of community
foundation programs.
The size of the sample presented in this paper does not lend itself to generalization.
The two case studies presented were identified as leading extraordinary initiatives.
Selection was conducted to advance understanding of the types of behaviors adopted by
community foundations with exceptional experience as community leaders. Additional
research on larger samples will have to analyze whether these results are relevant to the
larger field or isolated to the experience of these foundations.
Additional research is also needed to understand the relevance of community
foundation observations to the larger study of regionally-networked philanthropic
organizations. A comparative study that examines community foundations and the United
Way may assess the attributes that are unique to community foundation versus attributes
that are strictly the product of location. Community foundations attempting to demonstrate a
competitive advantage in today’s competitive market may wish to show that they are better
positioned than other regionally-based organizations to lead change.
The limitations of the research do not negate the exploratory contributions of the
study to the field. Hypotheses presented may guide future studies concerned with testing
new approaches to measurement. It is incumbent on the research community to challenge
assertions about responsiveness if it is to offer reliable information about accountability in
new governance networks. Cases like those presented by this research provide the data
needed to extract observations that may inform future efforts.
115
CHAPTER FOUR ENDNOTES:
xiii Workgroups included Arts, Culture, & Humanities; Economy & Employment; Government & Infrastructure; Health & Human Services;
Natural Environment & Recreation; and Youth & Education (www.envisionmanistee.org, 2004).
116
CHAPTER FIVE: CONCLUSIONS AND IMPLICATIONS
1. Goals of Research
This collection of three studies presents conclusions that impact the way research is
conducted on local problem-solving. The broad goals of the research aimed to explore
changing leadership structures at the local level as a result of the transition to new
governance arrangements. A reduced public sector role in local governance has left a
leadership void in many communities. Local community development efforts have been
realigned from a vertically-directed structure to a networked system dependent on
collaboration amongst cross-sectoral participants. The search continues within these
networked structures for an organization or leader to facilitate the collaborative initiatives.
Community foundations were presented as one potential solution to the leadership
question. These regionally-networked philanthropic organizations were posited to have
strategic advantages over the public sector and other private sector service providers as a
result of their position in the community. The three studies presented in this research were
designed to explore this proposition through a progression of research questions.
The first study was designed to test what institutional factors may position
community foundations to adopt the leadership role. The second study looked internally at
community foundations to test the determinants of strategic direction. The third attempted to
generate a new set of hypotheses to guide measurement of responsiveness in a
progressively more competitive community philanthropy environment. It was expected that
these studies would first identify a role for community foundations in new governance
networks, then test the influences on the decisions to adopt that role, and finally present new
measures to assess successful execution of the unique tasks required of a community
leader. The goals of the collective whole were to present a body of research that advances
our current understanding of the potential for community foundations and informs
117
subsequent efforts to make predictions about the capacity of these organizations to lead new
governance networks in the future.
2. Key Findings
Findings demonstrated that the public sector’s ability to facilitate local networks is
limited due to a history of one-sided policymaking and implementation practices. The use of
public funds to direct programmatic behavior has damaged the quality of cooperation that is
possible between public and private sector partners. The institutional constraints that have
mandated this type of interaction continue to challenge the ability of public administrators to
adapt to new governance structures today. These constraints strengthen the call for
alternative models of leadership at the local level.
A review of new governance literature supported the contention that regional
networks may be more efficient, more responsive, and more stable than hierarchical
leadership structures. However, these assertions are met with questions about
accountability in new governance networks. Measures capable of predicting accountability
may be strengthened by a shift in focus. Accountability is positively related to the level of
response to the community. Existing measures of response that are fixed on size of
endowment and funding behaviors fail to account for the influence of engagement on
problem-solving results. Organizations or leaders that demonstrate the ability to enmesh the
activities of network participants will be able to demonstrate response to the community and
better accountability to the network. Specific evidence of enmeshment was observed in the
production of a community survey process that comprehensively engaged members of all
segments of the community in conversations that identified issues, proposed solutions, and
guided implementation. The ability to leverage seed funding for implementation to generate
pools of resources, from multiple sources, to support initiatives offered further evidence of
enmeshment.
118
Additional questions exist about the vulnerability of the network to excessively weak
or strong facilitation. Community foundations present a viable solution for the facilitation
question. These organizations are structurally positioned within communities to adopt a
leadership role that may balance the demands of accountability with the calls for some
autonomy in decision-making. Significant questions remain, however, about the realistic
capacity of these organizations to adopt this role. There is distance between the potential
for community foundations and wide-spread evidence of organizations accomplishing this
promise.
Results demonstrate that there is a set of internal and external determinants that
contributes to the pace of adoption of the community leadership model. These determinants
may inform our ability to predict the behavior of community foundations in networks.
Strategic direction within community foundations was shown to be related to the age of the
foundation, stability of the community, and a growing level of competition in the community
philanthropy field.
Evidence demonstrated that there is a positive relationship between the age of the
organization and adoption of the community leadership strategy. Older organizations were
more likely to adopt a leadership role than younger foundations. This age effect holds
constant while testing for the size of assets, suggesting that age may induce more than
growth in endowment size. Analysis of the case studies suggests that age also generates a
web of relationships with network partners that is vital to successful execution of plans to
engage community members in network activities. Age may offer a proxy for connection to
the community or level of visibility. In either case, established placement within the
community assuaged concerns about the viability of initiatives designed to create significant
community and economic development in the region and encouraged the participation of
network partners.
The age effect is less likely to influence visibility and level of trust in a more transient
community with little institutional memory. Communities with stable populations that
119
possess a sense of ownership in the community are more likely to embrace community
foundations as leaders. Those which do not have an established record of interaction with
community foundations may be less likely to encourage these organizations to adopt a
facilitating role in major initiatives. It would follow that those communities with weak ties to
residents may be more likely to look to the public sector to guide local efforts because of its
historically recognized position in all communities.
Growing competition in the community philanthropy field has influenced community
foundation behavior in recent years. Private sector entrants, like Fidelity, offer donor
services products that are often priced below community foundation fees and offer greater
efficiency. Community foundations have found that they will not be able to compete with
these organizations in the future through cost comparison. The future of community
foundations rests on the ability to differentiate themselves from other donor services
providers. Place-based connection to the community is the primary competitive advantage
for community foundations. Ongoing conversation within the field that acknowledges these
realities may move community foundations to accelerate adoption of the community
leadership strategy in order to compete with new entrants.
The research community has been challenged to develop measures that may arm
community foundations with data to demonstrate the value of community leadership.
Evidence of responsiveness continues to be valued at a heightened level because of the
demands placed on new governance leaders. Existing measures of responsiveness must
mature to account for the grantmaking and nongrantmaking behaviors of community
foundations. Enhanced measurement capacity will enable analysts to present evidence of
responsiveness while also offering a set of data that may advance the predictive capabilities
of the field.
120
4. Limitations of Results
Conclusions from the research must not be overstated. The size and location of
research samples does not present generalizable evidence. While attempts were made to
test a larger sample than much of the previous research, more needs to be done to enhance
the predictive quality of the results. Larger samples from a better cross-section of the
country will advance results that may be applied outside of California and Michigan.
The methodologies of Chapters Two and Four offer only preliminary evidence in
support of the research goals. Chapter One presents a normative analysis of the public
sector and community foundations, but stops short of applying the model to a specific data
set that may provide better context for testing. This approach has left the conclusions
vulnerable to overgeneralization. Validity of Chapter Four claims may only be proven by
future research. Generation of a new set of hypotheses does move research toward new
methods, but more works is needed to assess the value of the measures presented.
5. Contributions and Future Research
This research has attempted to make methodological contributions to the field.
Studies were undertaken to advance previous efforts to test new governance progress and a
specific role for community foundations within local networks. The studies present the field
with three new models for analyzing community foundations. The triangulated collection of
studies presents three unique views of these organizations and their potential role in new
governance networks. Empirically testing these models will be the ultimate source of
confirmation for research conclusions.
The research also advances conclusions that substantively further understanding
about leadership of new governance networks. Results guide the potential for public sector
adaptation to a modified role in new governance. Current literature has remained fixed on
how the public sector may adopt private sector practices while maintaining its placement
121
atop the policy-making process. This research suggests that public managers consider
adopting new expectations about their roles in new governance.
Future research may consider how public sector policies incentivize the leadership
activities of private sector participants within local networks. The State of Michigan
demonstrates the potential influence that policies like tax credits and other funding
mechanisms may have on community foundation behavior. A multi-state study of similar
incentives may provide advocates of new governance networks with a set of policies that
have proven to influence behavior across the country. Identification of these variables would
enhance the predictive quality of research analyzing potential for regionally-networked
philanthropic organizations.
Similar research may be conducted on the influence of large private foundations on
community foundation behavior. The Michigan sample demonstrated the potential effect a
small number of private foundations may have on a larger group of community foundations.
The inspiration behind private foundation funding must be measured against the implications
of their grants at the community foundation level.
Future community foundation research may also analyze whether or not policies like
the Michigan tax credit or large pass-through grants from private foundations can mitigate
the age effect that was observed through this study. Without mitigation, age appears to
temper expectations about community foundations universally adopting the leadership
model. Variables that demonstrate the capacity to position young community foundations for
leadership may prove valuable to practitioners attempting to recommend adoption of
practices to improve the field. Without these variables, community foundations appear to be
passively held captive by an institutionalized life-cycle model.
The influence of public and private policies may inform research that attempts to
predict the likelihood that community foundations will be able to actively accelerate adoption
of the community leadership strategy. Concerns about competition have clearly influenced
discussion about community leadership. Future research may determine whether the
122
foundations that have identified leadership as a competitive advantage are constrained by
internal and external variables that make it difficult to move quickly through a life-cycle
model.
There is much to encourage optimism within the research community. Regionally-
networked philanthropic organizations, like community foundations, are receiving an
increased level of attention from the wider new governance community. Diverse studies
such as those offered by this research are collectively offering a more robust approach to
presenting evidence of impact on local problem-solving. It is clear that community
foundations remain more promise than delivery. Still, progress in the field continues to guide
these organizations toward a level of sophistication that may beckon them toward achieving
their promise. When this occurs, a future characterized by responsive public policy created
at the local level by cross-sectoral networks is well within our reach.
123
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APPENDIX A:
CEO Interviews: California
Community Foundation Contact Name
Interview
Completed
Amador Community Foundation Shannon Lowery 7/21/2004
Calaveras Community Foundation Trudy Lackey 3/16/2004
California Community Foundation Joe Lumarda 3/19/2004
East Bay Community Foundation
Michael Howe
3/3/2004
El Dorado Community Foundation Stephen Healy 2/2/2004
Fresno Regional Foundation
Jesse Arreguin
3/3/2004
Glendale Community Foundation Tom Miller 1/26/2004
Humboldt Area Foundation
Peter Pennekamp
3/24/2004
Kern County Community Foundation Noel Daniels 3/19/2004
Marin Community Foundation
Thomas Peters
2/9/2004
Community Foundation of Mendocino County Susanne Norgard 3/15/2004
Community Foundation for Monterey County
Todd Lueders
1/27/2004
Community Foundation of Napa Valley Terence Mulligan 3/31/2004
North Valley Community Foundation
Patty Call
2/27/2004
Orange County Community Foundation Shelley Hoss 2/10/2004
Pasadena Community Foundation
Jennifer Flemming
Devoll
3/23/2004
Peninsula Community Foundation Sterling Speirn 3/12/2004
Plumas Community Foundation
Michele Piller
3/30/2004
Community Foundation Serving Riverside
and San Bernardino Counties
Sheryl Alexander
2/4/2004
Sacramento Regional Community Foundation Janice Gow Petty 3/16/2004
Community Foundation of San Benito Gary Byrne 3/23/2004
San Diego Foundation
Bob Kelley
3/29/2004
San Francisco Foundation Sandra Hernandez 8/2/2004
San Luis Obispo County Community
Foundation
Dave Edwards
1/28/2004
Santa Barbara Foundation Chuck Slosser 1/26/2004
Community Foundation of Santa Cruz
Lance Linares
2/2/2004
Shasta Regional Community Foundation Kathy Ann Anderson 2/17/2004
Community Foundation Silicon Valley
Peter Hero
(information provided by
staff)
7/28/2004
Solano Community Foundation Stephanie Wolf 4/1/2004
Community Foundation of Sonoma County
Kay Marquet
6/11/2004
Sonora Area Foundation Mick Grimes 1/23/2004
Stanislaus Community Foundation
Patty Stone
3/22/2004
Truckee Tahoe Community Foundation Lisa Dobey 2/13/2004
Ventura County Community Foundation
Hugh Ralston
3/29/2004
130
APPENDIX B:
CEO Interviews: Michigan
Community Foundation Contact Name
Interview
Completed
Albion Community Foundation David C. Farley 11/22/2005
Ann Arbor Area Community Foundation Cheryl W. Elliott 11/22/2005
Baraga County Community Foundation Gordette Marie Cote 10/31/2005
Barry Community Foundation Bonnie Hildreth
7/7/2006
Bay Area Community Foundation Roger Merrifield 11/3/2005
Branch County Community Foundation Colleen Knight 11/15/2005
Cadillac Area Community Foundation Linda L. Kimbel
7/10/2006
Capital Region Community Foundation Dennis W. Fliehman 12/5/2005
Charlevoix County Community Foundation Robert G. Tambellini
7/20/2006
Community Foundation of Greater Flint Kathi Horton 11/15/2005
Four County Community Foundation Janet S. Bauer
11/21/2005
Fremont Area Community Foundation Elizabeth A. Cherin 8/14/2006
Grand Rapids Community Foundation Diana R. Sieger
11/22/2005
2/9/2007
Kalamazoo Community Foundation Jack Hopkins 7/27/2006
Lapeer County Community Foundation Janet Manning
11/15/2005
Lenawee Community Foundation Suann Hammersmith 11/2/2005
Mackinac Island Community Foundation Jennifer Bloswick
7/25/2006
Manistee County Community Foundation Karen Bruchan
12/15/2005
2/14/2007
Midland Area Community Foundation Denise Spencer 11/8/2005
Community Foundation of Monroe County Kristyn Theisen 11/4/2005
Community Foundation for Muskegon County Chris A. McGuigan
11/30/2005
Community Foundation for Northeast
Michigan
Barbara A. Willyard
11/7/2005
Petoskey-Harbor Springs Area Community
Foundation
Maureen Nicholson
11/1/2005
Saginaw Community Foundation Renee S. Johnston 11/1/2005
Sanilac County Community Foundation Joan Nagelkirk
10/27/2006
Community Foundation for Southeastern
Michigan
Mariam C. Noland
12/6/2005
Community Foundation of St. Clair County Randy Maiers
10/27/2005
131
APPENDIX C:
Interview Protocol and Instrument
The CEOs listed above participated in 30-45 minute one-on-one telephone interviews. All
interviews were conducted by the same researcher over the course of seven months. The
interview instrument consisted of the 25 open-ended questions listed below, grouped into 5
categories. Questions were not provided ahead of time. The interviewer did not provide
options from which to choose answers. In most cases, questions led to less-structured
conversations about community foundations.
Strategic Models
1.) What would you say is the foundation’s main strategic focus at this time?
2.) How has the foundation’s strategy changed with each decade?
3.) What were the particular events that caused shifts in strategy?
4.) Was there a deliberate decision to shift?
5.) Who was responsible for the decision?
6.) What percentage of your time/staff’s time is spent working with donors, partners,
nonprofits?
Organizational Characteristics
7.) What percentage of your grants is currently made with discretionary funds?
8.) How have your discretionary funds fluctuated with growth in your endowment?
9.) How do the demographics of your board reflect the community you serve, i.e.,
geographically and culturally?
10.) How have board structure and composition changed over time?
11.) How many of your board members are considered major donors?
132
Major Donors
12.) Was your foundation started with a charter gift by a major donor? If yes, what
percentage of the foundation’s assets did the gift represent?
13.) Was the original mission of the foundation dictated by this gift?
14.) Have there been other major gifts of this size? How many? When?
15.) How have major gifts changed the scope of activity for the foundation?
16.) Do you feel that donor advised funds inhibit your ability to respond to specific needs in
your community?
Social Venture Partners
17.) Who are the foundation’s primary strategic partners (e.g. private foundations, the
United Way) in the community?
18.) What is the nature of the relationship with those partners?
19.) Were those partnerships formed around specific projects?
20.) How have those partnerships strengthened or hindered the foundation’s efforts?
21.) Are partnerships more common during difficult financial times? Community
Characteristics
22.) How would you characterize the philanthropic tendencies of your community?
23.) Is there a large potential for increasing your donor base in the community?
24.) How do you publicize your efforts in the community?
25.) How would you describe your “typical” donor?

Abstract (if available)

Abstract This collection of three studies presents conclusions that impact the way research is conducted on local problem-solving. The broad goals of the research aim to explore changing leadership structures at the local level as a result of the transition to new governance arrangements. A reduced public sector role in local governance has left a leadership void in many communities. Local community development efforts have been realigned from a vertically-directed structure to a networked system dependent on collaboration amongst cross-sectoral participants. The search continues within these networked structures for an organization or leader to facilitate collaborative initiatives.

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Asset Metadata

Creator Morgan, Donald L. (author)

Core Title Community foundations and new governance networks: three studies exploring the role of regionally-networked philanthropic organizations in local problem-solving

School School of Policy, Planning, and Development

Degree Doctor of Philosophy

Degree Program Public Administration

Publication Date 04/13/2007

Defense Date 03/26/2007

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag community foundations,new governance networks,OAI-PMH Harvest,philanthropy

Language English

Advisor Graddy, Elizabeth (committee chair), Ferris, Jim (committee member), Hentschke, Guilbert C. (committee member)

Creator Email dmorgan@usc.edu

Permanent Link (DOI) https://doi.org/10.25549/usctheses-m387

Unique identifier UC1323856

Identifier etd-Morgan-20070413 (filename),usctheses-m40 (legacy collection record id),usctheses-c127-404095 (legacy record id),usctheses-m387 (legacy record id)

Legacy Identifier etd-Morgan-20070413.pdf

Dmrecord 404095

Document Type Dissertation

Rights Morgan, Donald L.

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Repository Name Libraries, University of Southern California

Repository Location Los Angeles, California

Repository Email cisadmin@lib.usc.edu