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Is MacKenzie Scott Going to Fix Strategic Philanthropy?

Ruth Levine 20 October 2021

This blog was first published on The Center For Effective Philanthropy and is published here with their permission.

Photo credits: Michael Olsen on Unsplash

Since mid-2020, MacKenzie Scott has made charitable donations totaling close to $8.6 billion across more than 780 nonprofit organizations and universities — a philanthropic tsunami announced not with launch events or ribbon cutting, but with three blog posts. The organization I belong to, IDinsight, was one of those fortunate enough to be on the most recent list; the Center for Effective Philanthropy is another. And we are both in good company among hundreds of other organizations working to make the world a better place.

More remarkable than the amount of grantmaking, however, has been Scott’s departure from the paper- and process-heavy norms of strategic philanthropy. This has caused those in the foundation and nonprofit sector, as well as the philanthropy peanut gallery, to reflect on whether her example offers a new and improved way to support organizations that are doing good.

The differences are easy to spot. Scott has not developed the sort of priorities, goals, and grantmaking strategies that shape the work of most staffed foundations. She’s described her giving as intended to benefit “organizations having major impact on a variety of causes,” informed by a conviction that “people who have experience with inequities are the ones best equipped to design solutions.”

Rather than setting up philanthropic infrastructure, Scott has asked a small number of advisors to conduct due diligence without burdening potential grant recipients. In fact, organizations being considered for funding often aren’t even made aware they’re even under consideration before the phone call giving them the good news. No proposals, no relationship-building, no waiting for the emails from program officers, no disappointments when the funding doesn’t come through. Contrast this with foundations that typically spend 10 percent or more of their annual budgets on personnel and administrative expenses, deploying program staff to fend off cold calls, review customized grant proposals, conduct site visits, and oversee active grants.

In many cases, the amount of support provided is far greater than a typical foundation grant, and most organizations have reported that the grant is the single-largest in their history – sometimes by severalfold. (A recent survey by Bloomberg provides more details.) The funding is unrestricted, too, providing grantees with maximum flexibility for use of the funds while keeping reporting requirements streamlined to the bare bones. Again, this represents a departure from project grants that are closely monitored by foundations’ program staff.

Observers have been quick to highlight the differences between Scott’s approach to giving and the practices of most large U.S. foundations — and the comparisons have not been flattering to name-brand philanthropy. The New York Times, for instance, noted that “[i]n the course of a few months, Ms. Scott has turned traditional philanthropy on its head . . . . By disbursing her money quickly and without much hoopla, Ms. Scott has pushed the focus away from the giver and onto the nonprofits she is trying to help.” Commenters and nonprofit leaders alike have lauded the apparent efficiency and simplicity of the approach, arguing that other wealthy individuals and endowed foundations are feeling the pressure to give larger amounts, faster.

The value of practices that create a lot of work for both grant maker and prospective grantee is being challenged. As reported by Bloomberg: “You’ve got to trust people who are on the ground doing this work,” says Edgar Villanueva, founder of the Decolonizing Wealth Project, whose Liberated Capital fund tries to steer dollars toward promoting racial equity. “People often say it’s hard to give billions of dollars,” Villanueva says, and Scott’s donation “weakens the case that giving away billions of dollars is difficult. It shows it can be done.”

So, does Scott’s approach show that professionally staffed foundations should abandon strategies, proposals, and reports — and even staff altogether?

Not at all. On the contrary, Scott’s giving shows that foundations that do engage in intensive due diligence and establish close relationships with grantees can do that work not only for themselves, but for the collective benefit of the larger philanthropic community and the organizations and communities they seek to help.

Scott’s selection of grantees would not have been possible without the knowledge developed and shared by other funders with specialized expertise. As Scott wrote in mid-December 2020, her team of advisors “sought suggestions and perspective from hundreds of field experts, funders, and non-profit leaders and volunteers with decades of experience. We leveraged this collective knowledge base in a collaboration that included hundreds of emails and phone interviews, and thousands of pages of data analysis on community needs, program outcomes, and each non-profit’s capacity to absorb and make effective use of funding.”

Without the work done within staffed foundations, it’s unlikely that ready-made recommendations and knowledge about nonprofits’ strengths and needs would have been available to Scott.

Scott’s selection process also builds on specific investments in nonprofit organizations made by other funders. A key consideration for Scott has been whether potential grantees possess evidence of their impact and organizational health. As she wrote, “We looked at 6,490 organizations, and undertook deeper research into 822. We put 438 of these on hold for now due to insufficient evidence of impact, unproven management teams, or to allow for further inquiry about specific issues such as treatment of community members or employees.”

As any nonprofit leader or foundation program officer knows, neither documentation of impact nor healthy organizational practices and culture come free; they require dedicated resources and, oftentimes, external expertise. Foundations that provide support for evaluations of various kinds, collect and analyze feedback from communities served, and make investments in organizational capacity and culture-building create value that extends far beyond a one-time grant. Funders that have helped to build up the organizations that were recommended by Scott’s advisors — and those that will be recommended in the future — should take enormous pride in their contributions to the nonprofit ecosystem.

Scott has found a way to complement and obtain value from the practices of professionally staffed foundations. In doing so, her approach serves as an inspiration — to established foundations, new funders, and individual donors alike.

Rather than abandoning their current practices, foundations can reorient them to do the most good. Specifically, given that the value of foundations’ due diligence and strategy development is greatest when it’s available to others, foundations can engage in funder collaboratives that facilitate knowledge sharing, and they can look for opportunities to build on, rather than duplicate, others’ due diligence activities.

In addition, foundations that provide resources for impact measurement and other organizational strengthening endeavors can — and should — view that work as contributing to a healthy nonprofit sector that is well positioned for diverse funding. With this view, foundations providing monitoring, evaluation, and other types of support can orient that work around setting nonprofits up for success with a broad range of funders, rather than only with themselves.

It remains to be seen the extent to which Scott’s dramatic arrival into philanthropy last year will shake up the sector and influence the approaches of her peers. For now, it is an important reminder of the ways in which every funder is interconnected within a larger philanthropic ecosystem — and how the important work of due diligence, monitoring, and evaluation can play a major role outside of a single foundation’s own walls.