Maximizing the Value of Philanthropic Efforts through Planned Partnerships between the U.S. Government and Private Foundations. C. COMPARATIVE ADVANTAGES OF THE PUBLIC AND PHILANTHROPIC SECTORS

05/01/2009

As this discussion of successes and challenges indicates, USG and foundations bring different strengths and weaknesses to their philanthropic efforts. Foundations appear to be advantaged by their independence, agility, flexibility, and ability to take risks and innovate. In contrast, USG possesses resources, influence, relatively more stringent accountability structures, and long time horizons.

1. Foundation Strengths

In their report for the World Bank on public-private partnerships, Eleanor Fink and Katrinka Ebbe (2005) sum up the comparative advantages of the private philanthropic sector: Due to their independence and flexibility, foundations can engage in cutting edge research, move quickly to capitalize on development opportunities, test innovative ideas, and take risks (p. 8). While foundation independence sometimes may impede communication, as noted above, it is also a significant source of strength. Put succinctly by another author, they [foundations] alone possess significant flexible resources that can be invested without regard to public deliberations or market restrictions (Sandfort 2008, p. 541).

The other clear advantage of foundations over government is their ability to take risks and test innovative practices (Fink and Ebbe 2005; Kaufmann and Searle 2007; William and Flora Hewlett Foundation 2008). This characteristic is linked to their relative independence and ability to act without engaging in complicated political and administrative processes, as compared to USG. Foundations are at liberty to take risks and innovate both in terms of their grantmaking processes and in their programmatic approaches. For example, in the late 1990s and early 2000s, the Edna McConnell Clark Foundation (EMCF) engaged in a deliberative review of its grantmaking strategy, which resulted in a complete organizational restructuring. The Foundation refocused its programmatic approach to include only youth development, moving away from a broader laundry list of program areas including poverty, child welfare, and education. The Foundation adapted their grantmaking to an organization centered theory of change whereby they would fund proven providers rather than programs that seemed appealing (Balin 2003). While such operational grantmaking is not entirely new, The Foundations complete reorientation bucked a distinct trend in the foundation world and their hands-on, business planning approach to nonprofit development is different from that of most operational grantmaking.

2. USG Strengths

While foundations can in general act more quickly and independently than government, it is important to note, as one author does, that the magnitude of private foundation funding is dwarfed by governments significant investments (Sandfort 2008, p. 541). Even the most well-funded foundations typically expend close to the minimum 5 percent of their endowment required by law of tax-exempt charities (Porter and Kramer 1999), whereas USG outlays on health and social services consistently reach into the hundreds of billions, and can be counted on to do so in the foreseeable future.

In addition to its capability of funding large initiatives, USG has the ability to commit to an initiative over the long term. With financial resources comes influence, and USG can rely on its power to persuade governments, as well as entities in the for- and nonprofit sectors, to do their part in supporting an initiatives success. In the same vein, USG has permanent, well-funded structures in place (for example, through the military or the Federal Emergency Management Agency) that allow it to act on a large scale with relative speed, when circumstances warrant it. Finally, while imperfect in many instances (HELP 2007), USG accountability structures are typically much stronger than those in the foundation sector (cf. Desai and Kharas 2008; Guidice and Bolduc 2004). This is, perhaps, the positive side of USGs relative lack of independence: Direct answerability to the public demands some degree of accountability, and in recent years USG has put great effort into developing accountability structures.

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