The pandemic has amplified pre-2020 critiques of strategic philanthropy. Funders, critics allege, were too inflexible, plutocratic and opaque. They hoarded wealth. And they often failed to adequately support the diverse communities they’re meant to serve.
The COVID crisis, coupled with growing calls for racial justice in the aftermath of George Floyd’s murder, has also compelled leaders to take a closer look at potential solutions to the sector’s problems.
For example, last June, we dug into funders’ growing interest in participatory grantmaking. The practice, which has been kicking around in some form for over 20 years, involves grantmakers outsourcing decision-making to community members to drive more equitable funding outcomes. Prior to 2020, most funders kept the practice at arm’s length. After all, participatory grantmaking requires experienced leaders to abdicate a core function—determining who gets the money—to outside parties.
But that was then. Recent events have scrambled the status quo, perhaps permanently, and have intensified calls for greater equity, transparency and power-sharing. Ten months after our initial pandemic-era take on participatory grantmaking, is the practice finally ready to go mainstream?
That’s the question Village Capital Communications Director Ben Wrobel and social sector strategist Meg Massey address in their new book, “Letting Go: How Philanthropists and Impact Investors Can Do More Good By Giving Up Control.” Drawing on over 100 interviews with activists, foundation leaders, academics and organization reps from around the world, the authors present the case for participatory grantmaking and its sister practice, participatory investing. They also profile successful practitioners and sketch out a roadmap for funders looking to take the plunge.
Wrobel and Massey have also partnered with a broad set of foundation leaders to launch Participatory Grantmaking Community, an online resource where over 300 members can connect with peers and share knowledge.
Wrobel and Massey are cautiously optimistic about the road ahead. “Several large foundations are funding research to look at the evidence base for participatory grantmaking, because there’s a ton of anecdotal evidence that it’s super-effective,” Massey said. “In the world of strategic philanthropy, having that data matters.”
Aligning practices
Village Capital is a participatory investor that uses a peer-selected investment model to allocate venture capital. Following a series of accelerators with participating entrepreneurs, the participants themselves select two projects for funding. Village Capital’s for-profit arm, VilCap Investments, provides the capital.
Village Capital has run this process over 70 times and made 110 investments over the past decade. Wrobel laid out how Village Capital’s model compares to that of traditional venture capital firms. “Less than 5% of traditional venture capital investment goes to women,” he said. “Our portfolio is 44%.” Meanwhile, less than 2% of venture capital flows to Black and Latinx entrepreneurs. Village Capital’s portfolio rate is 25%.
Given Village Capital’s model, Wrobel and Massey originally intended the book to focus solely on emerging participatory investing practices. However, when the pair learned more about how participatory grantmaking puts funding decisions in the hands of community members, they decided to include it in the book. “We realized that the decision points at which you can embed participation in an investing process aligned to decision points in the grantmaking process,” Massey said.
The limits of strategic philanthropy
When Wrobel and Massey began their research, they expected interviewees would lament the high-and-mighty opacity and stinginess of billionaire philanthropists. While their hunch proved mostly accurate, they were also struck by respondents’ gripes with institutional funders. “People are really frustrated with strategic philanthropy,” Wrobel said.
The roots of strategic philanthropy go back over 20 years. Writing in the Harvard Business Review in the late 1990s, economist Michael Porter argued that a “foundation creates value when it achieves an equivalent social benefit with fewer dollars or creates greater social benefit for comparable cost.”
That market-based way of thinking captivated grantmakers. Leaders began acting like CEOs “who set priorities at the top—treating nonprofits like contractors whose job is to see their vision through,” Wrobel and Massey wrote.
Two decades later, the flaws in this model have become apparent. A market-based approach may allow Apple to sell more iPhones in Pakistan, but it doesn’t effectively scale to “wicked problems”—a term writer Jon Kolko defined as “a social or cultural problem that is difficult or impossible to solve.”
Another characteristic of the market-based model is resource scarcity. Under the current regime, organizations are competing for finite amounts of capital on an uneven playing field. One nonprofit representative told Wrobel, “I am essentially spending all this money on a development director, who is never going to be able to compete with a Harvard-educated development director who has experience at Gates Foundation.” Some funders award grants on an invite-only basis. Most select winners at the conclusion of a closed-off decision-making process. Organizations that receive funding often find that the support is restricted.
In short, many funders restrict the flow of capital in their “strategic” quest to generate the most social benefit bang for the buck. “That’s why it works to talk about philanthropy and impact investing in the same book,” Wrobel said. “Because it is a marketplace.”
“It’s like trying to turn the Titanic around”
Long before the pandemic struck, organizations began calling for more flexible and equitable practices to offset some of the unintended consequences stemming from funders’ embrace of strategic philanthropy. Some grantmakers showed a refreshing willingness to adapt.
When COVID-19 hit, the need for greater flexibility reached critical mass. Last March, Ford and some of its partners drafted “A Call to Action: Philanthropy’s Commitment During COVID-19.” Over 800 funders signed onto the pledge’s action items, which included a commitment to “make new grants as unrestricted as possible, so nonprofit partners have maximum flexibility” to respond to the pandemic.
After George Floyd’s murder, funders ramped up support for racial justice initiatives and pledged to make their leadership ranks more representative of the communities they serve.
But change doesn’t happen overnight in the world of institutional philanthropy. “It’s like trying to turn the Titanic around,” Massey told me. To this point, I mentioned research showing that funders’ unrestricted giving across 2020 didn’t match the hype from the early days of the pandemic. Wrobel found the data to be surprising, but also understandable. “It’s really hard to shift things in one year,” he said.
The pair began writing their book six months before the pandemic. During that time, they noticed funders gravitating toward more unrestricted giving. It ended up being “one of the trends that were present pre-pandemic and just accelerated enormously,” Massey said. “It probably went from a 10-year shift to a five-year shift.”
“Difficult conversations”
Funders’ interest in unrestricted support and racial equity are unequivocally good things for the sector. But these pledges can obscure what Wrobel called “more difficult conversations” percolating under the surface. Namely, that foundation and VC leaders disconnected from diverse voices on the ground are still making pretty much all of the funding decisions across what Decolonizing Wealth Project founder Edgar Villanueva has called the “loans-to-gifts spectrum.”
This spectrum includes loans, venture capital, municipal bonds, philanthropy and other forms of capital controlled by banks, foundations and VC firms. In practically every instance, “white men are usually in charge, and everyone else has to be twice (or more) as good to get half (or less) as much,” wrote Villanueva.
Wrobel and Massey came to believe that by embedding participatory practices across the spectrum, funders could generate more equitable funding outcomes. Villanueva agreed. In the forward to “Letting Go,” he wrote that in order to decolonize wealth, foundations need at least half of the people who make decisions about where money goes to “have intimate, authentic knowledge of the issues and communities involved.” That means that “some of the usual suspects will have to give up their seats; they’ll have to take a step back.”
Massey and Wrobel will donate 50% of the book’s profits to the DWP’s Liberated Capital fund, which supports Indigenous, Black, and other people-of-color-led initiatives working for social change.
“Letting Go,” the abridged version
The first third of “Letting Go” addresses some of the big trends in philanthropy across the past decade, including the ubiquity of restricted giving, the rise of impact investing and mega-donors’ affinity for maximal control over decision-making.
The middle section explores the roots of participatory practices and includes profiles of the Boston Ujima Fund, the Brooklyn Community Foundation, and Red Umbrella, the first global fund guided by and for sex workers. Red Umbrella is “having conversations about legalization and healthcare that most foundations won’t have,” Wrobel told me.
In the final third of “Letting Go,” Massey and Wrobel look at how funders like the MacArthur Foundation have successfully scaled participatory grantmaking and investing efforts. The section explores other promising developments, like MacKenzie Scott’s decision to turn some decision-making over to a group of nonprofit leaders representing historically marginalized groups.
Despite these encouraging signs, obstacles remain, like the fact that the field is too dispersed to move as a single unified force. “Another concern,” the pair wrote, “is that participatory grantmaking will be framed only as a tool to make philanthropy more effective—rather than as an ethos that demands philanthropists let go of power.”
The section concludes with a series of questions to help guide funders looking to make inroads in the field. Questions for grantmakers include “how am I building my theory of change?” and “how am I building a pipeline of ideas?”
Wrobel and Massey note that participatory grantmaking won’t work for every foundation. For instance, a funder focused on disaster response can’t afford to convene a panel in the immediate aftermath of a hurricane. At the very least, the pair encourage funders to “practice principles of good human-centered design.” These include avoiding restricted grants and making the application process more inclusive.
The book’s afterword looks at larger questions about democracy in the aftermath of the January 6 attack on the Capitol, and argues that participatory practices can create “opportunities for citizens to practice democracy” and prove that “the system is not rigged beyond repair.”
“We want to cling on to our jobs”
“Letting Go” makes a compelling case that participatory grantmaking and investing align with funders’ stated aims to equitably allocate capital. So why are so many funders still on the fence?
Wrobel and Massey have noted that large institutional foundations are bureaucratic and deliberative by design. When it comes to shifting their practices, Rome wasn’t built in a day, to quote the old adage. But that doesn’t tell the whole story. Conventional wisdom suggests that funders and VC firms simply don’t want to relinquish control. While that might make them sound self-centered or self-important, it’s worth remembering that decision-makers have built up a skill set attuned to a very specific line of work, which they also happen to like very much.
I suggested to Wrobel and Massey that perhaps funders’ reticence has less to do with an obsession with control and more to do with guarded self-interest. After all, if leaders hand off the decision-making to participatory panels, embrace unrestricted multi-year support, and do away with onerous reporting requirements, what are they supposed to do all day? They’ll innovate themselves out of existence.
Massey said there’s some truth to this idea, pointing to a discussion she had with Hannah Patterson, who oversees a participatory grantmaking practice on behalf of the U.K.’s National Lottery Community Fund. “Participatory methods can feel like a threat to our professional expertise,” Patterson said in the book. “What are funders here for if they aren’t here to make decisions about funding or strategy? Is our role null and void? This self-preservation is an obvious and fair enough reaction—we want to cling on to our jobs.”
It’s also important to remember that since there is no one-size-fits-all model for participatory grantmaking, the idea of “relinquishing control” can be a relative concept. For instance, while the standard approach involves leaders outsourcing decision-making to a community panel, many models give final sign-off authority to the foundation’s board. Leaders usually rubber-stamp the community panel’s recommendations—but not always.
As the field continues to evolve, Wrobel is curious to see which funders will truly go all-in. He made his preference clear during our chat. “The book is about, how do we get this to be mainstream and wide-scale?” Wrobel said. “And I don’t think that our answer is, ‘We want to just trust that the foundation will always do the right thing.’ We’re on the side that boards should just relinquish sign-off power.”
An evolving skill set
Skittish foundation leaders can breathe a sigh of relief in the knowledge that, according to Wrobel and Massey, participatory grantmaking won’t force them to lay off program staff—or themselves! They will, however, have to rewrite job descriptions and retrain existing employees.
Foundations traditionally hire for roles that are “very much analytical and geared toward consulting work,” Wrobel said. But funders embracing participatory grantmaking have seen staff transition to an advisory role requiring soft skills like emotional intelligence and an ability to facilitate conversations.
“Rather than saying, ‘You must do this to get our money,’” Massey said, staff now ask organizations questions like, “‘How do we move money in ways that are going to be impactful for you as a person affected by this challenge?’” Massey considers this approach a “much more authentic way to address pressing social issues” compared to the status quo.
Wrobel told me that this necessary behavioral shift can partly explain why foundations haven’t aggressively phased out restricted grants over the past 12 months. Doing so could put the MBAs and consulting pros who oversee these programs out of work.
Given this reality, Wrobel believes that foundations need to frame their transition toward a participatory model as a “five-year process that is going to involve upskilling and training your current staff on how to think differently and facilitate these kinds of conversations.”
“You have to give yourself time”
We ended our chat by looping back to one of the key components of strategic philanthropy—metrics-based performance measurement. Funders, Massey and Wrobel said, will need to strike a balance between their understandable desire to measure the effectiveness of a participatory grantmaking program with the urge to roll out the kind of time-intensive and punitive metrics that are a hallmark of the “strategic philanthropy” model.
Again, it comes down to a matter of an organization’s resources. If a funder heavily relies on quantifiable outcomes, “they’ll inevitably favor organizations that have the capacity to track all of that,” Massey said. At the end of the day, “you measure participatory grantmaking like you measure anything else,” Wrobel told me. “It’s a question of if the metrics have teeth. Saying, ‘If the organization doesn’t hit the metrics, they’ll lose funding’ is problematic.”
Nor should funders abandon ship if the experiment fails to yield immediate results. “You have to give yourself time,” Wrobel said. “The Boston Ujima Project took five years to build. The Disability Rights Fund took two years to build out and they’ve iterated their model every year for the past decade.”
Lastly, funders need to remember that a spreadsheet can’t neatly measure the “success” of an organization’s efforts to address a wicked problem. Massey told me of a former colleague at the Urban Institute who said that unless she could talk to the people participating in a specific program face to face, all the data in the world is meaningless. “It’s a matter of how you put that work in context,” Massey said. “If the community doesn’t have a voice in that, you end up working toward an imperfect North Star.”