As I wrote last week, writing usefully about philanthropy is hard. But a recent controversy has inspired me. Late last year various news outlets carried the story that a generous donor, The Suder Foundation, creator of the First Scholars program of scholarships and support for “first generation” college students was suing some of its grantee institutions for failure to live up to the grant-based agreement to continue the program after the external funding ended. Commentators talked about the perfidy of the grantee institutions or the naiveté and bad math of the grantor (failing to endow the programs).
This controversy highlights the broader issue of “sustainability” in philanthropy and non-profit activities. Sustainability seems to me to be one of those overused, “magic” words – people know it’s a good thing, but don’t think much further to try to understand exactly what kind of thing it is. At the end of the day, for a philanthropic funder, a program activity is sustainable when there is someone else who at some point will be willing to pay for it to go on. That “sustainability” funding may be from earned revenue, from dipping into an undifferentiated stream of individual donations, or somewhere else, but someone has to pay. There is no free lunch. And it is always harder than it sounds.
Sustainability is also not purely a program property, but a product of the program (costs and benefits), residing in an organization, in the context of its environment (funders, stakeholders, government). Particularly as venture capital has increasingly become the metaphor for philanthropy, (I almost wrote “philanthropic investments,” which shows that I, too, have been sipping the Kool-Aid), the VC notion of being “taken out” gains currency. The idea is that “investment” money is always moving on and some other investor taking over, the way VC firms succeed each other at different stages of a start-up’s development. This occasionally may end in the Holy Grail of a successful IPO. Unfortunately, one of the potential over-extensions of the VC metaphor is that in the non-profit/philanthropic situation, an excellent program that delivers great impact can easily exist WITHOUT a viable new funding source to continue on. And while an IPO is like winning a lottery in the real start-up sector, there isn’t even a real analogy for an IPO for us.
In the case of the Suder Foundation’s grants and the Universities’ response (or lack of response), part of the problem seems to be this overextension of the financial metaphor.
The initial phase of external funding for the First Scholars program is described as the seed phase, where the Suder Foundation would pay for the start-up costs. According to news reports and its website, the First Scholars program was substantially more effective in keeping first generation college students enrolled than preexisting efforts. While this success is described as “ROI” there is no actual short-term financial return to use to sustain the program. Metaphoric returns on investment are not spendable on real programs.
The second phase of the First Scholars is described as “University Self-Funding” but had no specified mechanism for raising new funding. (There was some discussion of Suder support for University “fundraising”, but having been in those shoes, I can testify how very hard it is to get one funder to replace another – it feels ignominious and uninspiring to most potential replacements. I’ve done it several times, but also faced intense board criticism for it.) So, to the extent that there was a plan, I deduce that the grantor and grantees expected to redirect existing scholarship and student support funding into a locally controlled version of the First Scholars program. This is actually not an unreasonable plan. Finding new and more productive ways to spending existing resources is easy to support in concept, but doesn’t do justice to the complexity of such changes.
An example from my experience.
In 1999 at the John A. Hartford Foundation, I was staff lead for the IMPACT trial, an eight-site randomized clinical trial of depression treatment that still remains the largest such study in the US. Given our interest at the foundation we wanted the evidence from the trial to change national practice and policy (still working on that), but we also wanted the participating sites to maintain the program, if the evidence showed that it produced superior outcomes for patients. Like Suder we paid directly for the services in the trial phase and we wanted the grantees to keep them going.
For four years as I traipsed around on my annual site visits, I would always ask the grantee team and whatever institutional leaders they could round-up: “If the model works, will you keep it?” And at least what I heard was “yes.” I distinctly recall a senior service leader at a large Midwest health system who always was very clear about the institution’s commitment to both evidence-based practice (meaning we would have to wait for results) and to high-quality care (meaning that if the results were good, they would keep the program in place.)
Well, when the trial phase came to the end and had not just good results but GREAT results – twice as effective as care as usual – this senior leader had retired and gone on a medical mission to Africa. I was in the very same position as the Suder Foundation is relative to the University of Alabama where the entire development and leadership staff has turned over and nobody remembered any commitment to “sustain” the program. Needless to say whatever minimal internal discretionary funds might have been under the control of this stakeholder, they were not forthcoming.
Does this make the institution evil or me naïve? (I certainly was less experienced, but I already knew sustainability was an issue.) I would say “neither.” Sustaining a program under these conditions or those of the Suder Foundation grants, requires recognizing a few realities.
- Academic/health institutions expect to get grant money. They are good at doing grant-funded projects, faculty and staff can “sell” time to new projects in a very flexible way, unlike in most companies where existing staff are dedicated to on-going functions. Senior administrators sign-off on many, many such grants each year, rarely with serious consideration of what they are agreeing to.
- However, on-going functions, such as standard health care practices or standing scholarship funds are controlled by other stakeholders, separate from the grant-seeking/grant-management leaders. This is part of what gives institutions flexibility –they insulate core activities as much as possible from the vagaries of grant funding.
It is not unreasonable, despite commentary to the contrary, to expect an institution to change the way it spends its own money depending upon the results of a grant funded project, it is just very complicated. Despite being within one institution, you essentially face the same problem of using evidence to encourage a program adoption without a grant when you want to achieve such “sustainability.” And, if at the end of the day, there simply aren’t enough shiftable resources to maintain the program, it won’t be sustained. A good business analysis and plan at the outset might be helpful, but should philanthropic dollars only go to those activities where someone else will be willing to pay down the road?
 The early days of philanthropy are sometimes thought be a golden era where better solutions to social problems were relatively easily taken up by government (e.g., painted road dividing lines and the 911 emergency system, both started as philanthropic efforts but are now sustained by tax dollars). However, I’m sure it never was easy then and it does still happen now on occasion. See http://www.jhartfound.org/blog/philanthropy-1-0-still-building-better-mousetraps/.
 This was then to lead to the Third Phase, a National Network of operating “franchised” sites that would do program research, quality assurance, etc. – but again without the actual dollar flow of a franchise operation – another financial metaphor overextension.