Prime example of excessive spending on overheads or candidate for greatness: which is the Ford Foundation?

 

Caroline Hartnell

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On 11 April David Callahan posted a blog on Inside Philanthropy called Ford Sinks Over $1 Billion a Decade Into Overhead. Is That Money Well Spent? Callahan clearly doesn’t think so. He makes clear that ‘Ford is not some unique creature of excess. … Ford’s overhead level is fairly typical among big legacy foundations. But because Ford is so large, these numbers add up in a pretty shocking way …’

Looking at 2013, Ford had total expenses of $685.5 million dollars and spent $146.4 million on operating and administrative costs, or just over 20 per cent. (Again, Callahan emphasizes, ‘that figure is not unusual among legacy foundations’.)

The problem at Ford, in Callahan’s eyes, ‘is not that its staff are overpaid. It’s that there are too many of them.’ ‘A staff-intensive grantmaking model that hinges on doling out innumerable program grants … costs a fortune – money that could be better spent.’

He contrasts this with the Susan Thompson Buffett Foundation and the Sherwood Foundation, also controlled by Buffett, which together made $552 million in grants in 2013 and spent only $11.5 million, or around 2 per cent overhead, in so doing. The reason: ‘Because they have a different funding model. They support fewer organizations with much larger grants. And you don’t need an army of staff to do that.’

While admitting that ‘it’s not easy to compare the impact of different grantmaking models’, Callahan suggests ‘at least three good reasons for places like Ford to change how they do business and slim down in a major way’ regardless. First, ‘when a fifth of a foundation’s annual budget doesn’t reach the people it’s supposed to help, that can’t help but water down its impact.’ Second, ‘grantmaking budgets tend to get spread too thinly over too many issues and organizations to have maximum impact.’ Third, ‘those closer to the ground are in a better position to call the shots in civil society than a cadre of elites who are famously insulated from any candid feedback about their actions.’

Click here to read Callahan’s full post. 

Just three days earlier, on 8 April, John Harvey posted a blog on Latest from Alliance titled ‘What makes a foundation great? Six steps to brilliance and impact’. In summary, these are:

1  Taking on major challenges
2  Working for systemic change
3  Flexible financial strategies
4  Deploying all the foundation’s assets
5  Accountability to their constituents
6  High levels of professionalism

A few days later, challenged to name names and suggest foundations that met his criteria, Harvey wrote:

‘Allow me to go out on a limb and name one foundation that I believe has the most potential to excel in all six of these criteria: The Ford Foundation (USA). Ford has historically been strong on criteria #1 and #2. More recently, Darren Walker and the leadership team he is assembling have launched efforts that advance the remaining criteria, including Ford’s multi-faceted work in Detroit (criteria #3 and #4), its participation in the Fund for Shared Insight (criterion #5), and the assembling of a highly respected talent management team to advance leading edge practice (criterion #6).’

Click here to read his full post.

So which is Ford: prime example of wasteful spending on overhead in pursuit of an inefficient funding model or a candidate for being called a ‘great foundation’? We’d love to hear what other Alliance readers think.

Caroline Hartnell is editor of Alliance magazine.


Comments (1)

Jenny North

‘when a fifth of a foundation’s annual budget doesn’t reach the people it’s supposed to help, that can’t help but water down its impact.’ This just simply doesn't follow! What if a Foundation spending a fifth on overheads does so to work intensively with grantees to make them impactful? Arguably this a far more effective way of 'reaching people' than by 'hands-off' grants to organisations which aren't very effective. This may not be the way the FF works, but to declare that a fifth on overheads 'waters down impact' by default is simplistic and naive.


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