The Charles Stewart Mott Foundation is widely respected for its successful and innovative funding. What is the secret of this success? It seems that the answer may lie partly in a unique blend of leadership and delegation. Michael Brophy talked with Bill White, Mott Foundation Chairman, President and CEO, late one evening at the annual CIVICUS meeting in Manila.
Asked about the secret of Mott’s success as a grantmaker, Bill White’s first response is ‘I wish I knew!’ And his second reaction: ‘We hire bright young people and we give them all the latitude in the world!’
But isn’t there some kind of direction from the top, some kind of strategy that is communicated to this very bright young staff, what some people might describe as ‘old-fashioned leadership’? Again comes the throwaway answer: ‘Ah yes, they let me think that we’re working from carefully designed plans, and I let the Board think we’re working from carefully designed plans. But it’s young staff running around — talking to grantees, making site visits, and so on — who do it all.’
Followed by the serious answer: ‘If we have a hallmark, it’s our long tradition and respect for the fundamental principles that C S Mott was interested in. Because of this, we literally meet him every day whether or not we even knew him. We’ve been creating and applying those principles to the modern-day world and trying to think ahead. Mott was a forward thinker and a careful planner; we try to do the same.’
The role of the Board
According to White, it all begins with the Board of Trustees and the way it operates. ‘They empower the staff, give them a lot of running room. The Board doesn’t get involved in details.’ Of 550 grants a year, it may look at and approve only about 20.
One criterion for Board review is grant size. ‘Frankly our Board has reached a point where if the grant is under a million dollars they don’t individually act on it — but Board scrutiny is more a matter of a particular grant falling outside agreed policy guidelines.’ Policy takes the form of a basic five-year plan in each programme area. The Board approves the plan and then lets the staff run with it.
In most foundations staff have to go in front of the Board of Trustees and justify the grants. In the Mott Foundation they don’t, so if a programme officer recommends a grant very strongly, the odds are that it will go through. ‘This gives them greater authority, greater flexibility, greater manoeuvrability in talking with the grantee. They don’t always have to be saying, "I don’t have authority to do this".’
Then there are the ‘slush funds’ – or ‘those extra monies that are unallocated’, which enable the Foundation to respond quickly to requests that other funders might have to think about. ‘So when I’m talking to the Secretary of Education about some programme and ask him what he needs from us, and he says, "Well, we could use $2 million for the following", I can say, "You’ve got it", subject to a little minor checking. A lot of foundations don’t have that flexibility.’
At this stage Bill White re-emphasizes the role of the Board: ‘If we have any success it starts with the Board, which knows what its responsibility is and what it isn’t.’
Keeping Trustees involved
It would be easy, but wrong, to conclude that the Board somehow keeps its distance from the Foundation and its work. Annual site visits — last year the Trustees went to Moscow for two weeks — are an essential part of making sure they understand what the Foundation is doing. ‘So if they see a microcredit programme, a community school or an after-school programme, we can say to them, "You saw that programme, you understand that programme, do you like it?" And if they say, "Yes, we like it", we can say "Good, we’re funding 20 more like that".’ There are also major presentations at Board meetings, sometimes made by outside presenters, as well as staff members.
Learning from Flint
But all is not a record of unbroken success, and the Foundation’s home town acts as a sort of testing ground. ‘We have made a lot of mistakes. We are located in a local community called Flint, Michigan, and we do funding there. When we make a mistake there, it comes back to haunt us, so it provides a reality check to the grantmaking. So all our work abroad is tempered by the question, "Could you make it work in Flint?"’
The topic of race has cropped up in all Mott’s programme areas recently. ‘This is where we go back to Flint. I say, if you can’t do something about race in Flint, don’t go around the world and preach "race". So we’re trying to do what we can. I don’t know if we’re going to be successful, because it’s a horrible problem, and Flint is about as racially divided a place as you can find to work in.’
Learning from the business sector
Bill White is a businessman as well as a foundation leader, and this is clearly another influence on his thinking. He contrasts the intolerance of failure that is increasingly a mark of the business world with a far greater tolerance of social ills. He serves on the board of a company that is involved with the production of orange juice, and he knows that if a group of people became ‘deathly ill’ and ‘perhaps a couple died’, and it was traced back to the orange juice, ‘they would be after me’.
The dropout rate in the American public school system is 14 per cent; according to the US Department of Education, it is far higher in inner cities. White queries: ‘What if one out of every seven banks failed? What if one out of every seven automobiles didn’t run? Society would grind to a halt. On the other hand, one out of every seven kids drops out of high school, to be condemned to a life of poverty, and our society finds that perfectly acceptable.
‘It seems to me that the business community increasingly cannot tolerate failure. We heard from NORCAP that they would be out of business if their Internet went down for a week. Yet we as a society say we can tolerate the failures of our schools. Civil society organizations are trying to correct this thinking, and insisting that we have urgently to find solutions.’
Bill White’s own role
What difference does White’s own unique position as both president and chairman of the Board make? Does it enable him to say to his staff, ‘Don’t worry about the Board because I’m the Chairman of the Board as well as your boss.’ Doesn’t the combination of roles enable him to be incredibly flexible?
White offers two separate comments. The first is that his joint role is unique to him. The first president was Charles Stewart Mott himself, but he was never chairman. When his son, Harding Mott, became president, C S Mott kept the title of treasurer and became the honorary chairman. This latter title never even appeared in the bylaws. Harding Mott became chairman of the Foundation in 1975.
White discussed assuming this dual role as president and chairman with Harding Mott, who was also his father-in-law, before Harding died. ‘We decided we’d been operating a certain way for a long time, and it made sense for me to have both titles because of the way we had evolved.’ The present management style of allowing staff a lot of leeway seems to have operated then too. ‘My father-in-law let me make a lot of mistakes and he tolerated them; he was great in that respect.’
But this system won’t necessarily continue after he retires. ‘The Board told me once that if I were to leave they might not delegate as much to a new person until they had confidence in that individual.’ Characteristically, White does not take all the credit for the confidence that is placed in him: ‘The other reason they have confidence in me is that they get to know the staff, the people who are doing the real work, and they have confidence in them.’
Accountability to the Board
Bill White’s second response relates to accountability: there is a clearly defined system for monitoring his performance. During the December Board meeting he presents a self-evaluation — something he volunteered to do — and the Trustees go through it. The self-evaluation is basically a report on what the Foundation has accomplished during the past year and what the goals are for the coming year. ‘It is fairly tight and fairly specific’. He is then dismissed from the meeting. ‘They will talk about performance and anything else they want for an hour — sometimes two hours — set salary and all of that. In some cases there is probably more discussion of performance than there is in a lot of foundations.’
Handling the investments
The Mott Foundation is unusual in that it manages its own portfolio with its own investment staff; the Ford Foundation has a similar system. For the past ten years Mott has achieved roughly an average annual 17 per cent return on its portfolio.
During that time the portfolio has never had less than 70 per cent in equities; today that figure is about 76 per cent. But White does not see that as ‘being willing to take the risk’. ‘We don’t think it’s taking risks, because we think we’re fairly good at understanding markets. Basically bonds do not perform over a long haul, at least in the US.’
Mott’s asset management strategy is to ensure that there is enough cash to meet the Foundation’s obligations for three years without selling one share of common stock in a down market. ‘Once we can meet our payables — that’s all you’re interested in, can we pay our bills — why have a lot of cash or bonds sitting around? So we just put it in the market.’
The only part of the portfolio he will acknowledge to be risky is the 8 per cent of equity holdings that is in venture capital. ‘But, on reflection, it would be a mistake not to be involved in venture capital.’ The remaining 24 per cent of the portfolio consists of very safe bonds — ‘no derivatives, no hedge funds, no junk bonds. They are all fairly high grade bonds because that’s the part of the portfolio we sleep on.’
What about ethical investment?
A question about ethical investment elicits a dismissive answer: ‘What’s ethical? What’s ethics got to do with it?’ However, what follows sounds remarkably like an ethical investment policy. ‘We do not invest in any utilities that have a nuclear exposure, we do not invest in any alcohol, gambling or tobacco stocks. We will probably not invest in any companies that are involved in privately owned prisons. We have some concerns about being involved in the waste management business.’
Investing in international non-profit sector infrastructure
There are only a handful of US foundations that fund non-profit sector infrastructure outside the USA in a big way, and the Mott Foundation is one of them. The Kellogg Foundation, the Ford Foundation and Rockefeller Brothers Fund are some of the others. What has influenced Mott to take this strategic view about sector infrastructure?
The response is a straightforward one: ‘I guess the answer is it comes out of our experience of supporting infrastructure in the States and realizing we have the ability to do it. We can’t solve all the world’s problems — we don’t have the resources. But by funding infrastructure we provide a way for individuals and groups to exercise their charitable impulses. To be really effective, philanthropy has to operate on Main Street USA, and I think this is true for the many other “Main Streets” throughout the world.’
It also seems to be a matter of experiencing the need for a sector infrastructure, both at the national and at the state level. With the introduction of the 1969 Tax Reform Act (which created an entirely new – some would say highly restrictive – legal and tax environment for the US foundation community), US foundations, and indeed the whole charitable sector, realized the need to talk with one voice more effectively, or at least to be organized and able to tell Congress about the sector. For this you have to have good statistics on the sector, and they weren’t always available.’
The Michigan experience crops up again. ‘Don’t forget that my experience also comes out of Michigan where we have probably the biggest and most effective state-wide, regional association of foundations in the US.’
But, he stresses, the fact that Michigan has some big foundations like Kellogg and Mott is not what makes the regional association effective. ‘When we meet in Michigan we value the opinions of the foundation that may only have a giving programme of $50,000 as much as we value the one that has a couple of hundred million. That, to us, is our strength — collegiality, people getting together and realizing we have got to deal with common problems.’
Finally, he refers to what he calls the ‘craft of grantmaking’. ‘I feel increasingly it is important that all the new players understand the craft of grantmaking. A lot of people don’t understand, so you get the arrogance.’ Such arrogance might be avoided if foundation staff remembered that ‘foundations are only as good as the work of the grantees they support’.
The question ‘What next?’ brings Bill White back to some of his earlier themes – to the experience of Flint, Michigan, and what can and can’t be done there, and to the influence of C S Mott himself. ‘I fundamentally believe that you have to go back, in our case to the guy who started the place, and see broadly the types of thing he was interested in.’
He sees race as a big issue for the future, both in the US and abroad, and one that keeps ‘popping up’. Both Russia and the environment continue to pose large challenges. But basically the message is more of the same. ‘Generally speaking, if you are looking forward, planning, and find yourself saying that everything we did was nice but it was wrong and we are going to throw it all out and start again, there has been a major disconnect. We have to build upon what we are doing today. We have a lot of unfinished work. I think we’re in the areas we want to be in, going forwards.’
If there’s one place he would like to be in, ‘and probably should be’, it’s China. ‘We have thought about it but we don’t have the resources, we are spread too thin.’
The Mott Foundation
Established in 1926 in Flint, Michigan by automotive pioneer Charles Stewart Mott, the Mott Foundation supports non-profit programmes throughout the United States. Its international grantmaking is largely concentrated in Central and Eastern Europe, Russia and South Africa. The Foundation has four programme areas:
- Flint area
- Pathways Out of Poverty
- Civil society
The Foundation awarded 550 grants totalling $88.2 million in 1998, with year-end assets of $2.35 billion. The Foundation Center ranks it as the sixteenth largest US foundation in 1997 (the latest year for which figures are available).
William S White is Chairman, President and CEO of the C S Mott Foundation. He has been with the Foundation since 1969, becoming President in 1976 and Chairman in 1988. He currently serves on the boards of CIVICUS and the European Foundation Centre. He is chairman of the United States Sugar Corporation and serves on the board of the American Waterworks Company.