We all can learn from our mistakes, but publicly acknowledging them is often a different story. More and more organizations, such as the the William and Flora Hewlett Foundation, are coming forward and “embracing their failures” in an effort to bring about real and substantial change to organizational practice, strategies, grantmaking, and overall impact. Rick Cohen of the Nonprofit Quarterly (NPQ) outlines a survey conducted by NPQ that speaks to the ways foundations can begin to better recognize these failures and understand how to learn from them. Wisconsin Philanthropy Network also embraces the value of failures, proudly presenting “The Best Funding Mistakes We Ever Made” at our 2015 Statewide Conference.

Click on this link to read the source article about how you and your organization can learn from your failures and more effectively cultivate change.

Foundations Embrace Failure: Real Lessons Learned

by Rick Cohen

The Hewlett Foundation report (PDF) quoted from above is widely seen as candidly self-critical on the foundation’s $20 million comprehensive community initiative with language in the foundation president’s cover letter describing one of the site’s self-destruction and calling the entire effort a “great disappointment.”   More recently, Hewlett held what appears to be an internal competition among its grantmaking departments for each to identify one grant that fell short of expectations and provide an analysis of what went wrong and what the foundation should learn from the experience.

Other foundations and other institutions are increasingly congratulating themselves for their new openness to “embracing failure” – being willing to talk about mistakes, admit them, and try to learn from them.  Examples of proponents of learning from failure include the Annie E. Casey Foundation (as evidenced by Casey VP Robert Giloth’s edited volume, Mistakes to Success(PDF),  the Bill and Melinda Gates Foundation, the Case Foundation, the William and Flora Hewlett Foundation,  the trade associationspromoting small foundations, the Asian Development Bank (PDF), and major international corporations.

Is this posturing or is it for real?  And to what end?  Will foundations admit that they completely screwed up, or will they suggest, as Hewlett ultimately did with its comprehensive community initiative, that the grants were mistimed – that the communities weren’t really ready for the foundation’s help?  All too frequently, the discussions of failure are really not about failure at all. They are discussions of programs that fell somewhat short of expectations. Even more frequently, the program failures are in fact small successes – the programs that didn’t achieve quite what they were intended to achieve, but still left the communities measurably better than they were before the foundation’s intervention.

Rather than emphasizing small successes, foundations should focus on failures that may be hardwired into some foundation’s DNA.  This means not only using foundation-funded evaluations and pilot projects to learn from, but also to look closer at day-to-day foundation grantmaking.

The core critique to be made of foundation “mistakes” is the tendency to focus on lessons from projects, whether partial achievements or total flops, at an elevated level that misses a crucial factor.  Foundation grants deal with, affect, benefit, and disrupt real people, not abstractions, and foundation mistakes come with often serious consequences for people and communities left high and dry.  All too often, funders are motivated by the attractiveness of their idea, their vision for a community, and the sense that they have a model that can yield benefits far beyond local communities.  Funders sometimes forget that there are people involved in these experiments.

Some funders fail to see that the best innovations occur when they invest in building community capacity and community infrastructure, when they invest in the ability of a community to identify, address, and commit to grappling with its own problems.  In arecent article about government in the Democracy Journal, the two authors suggest that the best role of government is to establish the “what” –the ideals and the goals for society – but to let a radical localism that embeds the implementation of solutions to communities and their infrastructure of community organizations establish the “how.”

But there is so frequently the attractiveness of social engineering from on high. Some foundation-initiated community economic development initiatives forget that there are real people in those communities whose expectations are raised and dashed, as some foundations – some foundations – get overly taken with their social engineering prowess.  Foundations have to remember that they are outside interveners, they alter and disrupt community dynamics with the carrot of large grants, and when they change and shift, the results on the ground can be disheartening if not devastating to communities.

In two analyses of the Northwest Areas Foundation’s Community Ventures anti-poverty initiative here (PDF), and here, and more recently, in NWAF’s own report (PDF) taking stock of the program, NWAF’s social engineering was shown to be not only insufficient compared to the program goals, but actually disruptive, resulting in community protests that led to compensatory actions on the part of the foundation.  Overall, despite the absolutely best of intentions, the program was a failure for essentially overriding the indigenous structures of community governance by local people.  Somehow, the foundation eschewed what makes things work best, building the capacity of a community’s nonprofit infrastructure to respond to and solve problems.

To better understand how foundations might learn better from mistakes NPQ conducted a thorough survey of more than two dozen people inside and outside of philanthropy – grantmakers as well as grant recipients. We wanted to know what foundations can do to create a culture of sensitivity to the communities in which they disburse their grants.  We wanted to know how to keep mistakes from turning communities into petri dishes and people into lab experiments.

On what causes the problem . . .

• The learning predispositions of senior management:  There has to be a culture of learning if foundations are to be able to think about learning from mistakes – and recognizing them as their own.  It means avoiding getting carried away with the rightness of your ideas and the sense that somehow the solutions to complex social problems are lodged in technical solutions that the foundation can support.  As the Gates Foundation is learning in its health initiatives in Africa, it is often the community that needs support, the infrastructure for the delivery of benefits, not necessarily the technical innovation, or in Gates’ case, the vaccine.   Nearly every respondent to our survey suggested that it is near impossible for foundations to get honest feedback, that nonprofits – grantees and potential grantees – are unwilling to risk their relationships with foundations by saying, “your grantmaking strategy is off-base, wrong, a mistake.”  But with foundation executives with big ideas, one of the delights in current philanthropy is to be seen as a contrarian, willing to buck common wisdom, including common wisdom received from the field that says that your big new idea is off the mark and potentially destructive.  So sometimes, feedback from the field gets dismissed simply because idea-energized foundation executives see the feedback as unimaginative, trite, the usual.

• Overpromising the benefits of foundation ideas:  For all the money that foundations think they have at their disposal, foundations are really microplayers addressing macroproblems.  Annie E. Casey Foundation VP Ralph Smith says that foundations should be in the solutions business, funding solutions to social problems wherever the solutions might be found, in the nonprofit, for-profit, or governmental sectors.  But solutions to complex social problems are hard to produce with micromoney.  And government has changed.  Often funders meet to debate how their interventions are going to solve community problems like housing, jobs, and health – though solutions to any one of them, even in local arenas, would bankrupt foundation coffers.  But community people see the announcements, sense the presence of foundation executives and consultants with clipboards, and cameras in town, and their expectations and appetites rise nonetheless.

• Unrealistic timeframes:  Foundations and other funders often want to see changes and impacts and outcomes in timeframes that simply don’t make sense given the enormity of the issues they are trying to affect.  Because they think they are funding technical solutions in community economic development, for example, some foundations fail to take the long view of the capacity they need to build to see solutions through to fruition.  So the mistake is frequently that they have entirely unrealistic views of what they are looking for, and they pull the plug or declare something a failure because they don’t have the institutional peripheral vision to spot the potentials for long term success.  Again, that is why investments in the capacity of a community to address problems, a long term response, do not fit a lot of the foundation social engineering, but might be crucially important as components of creating success rather than funding mistakes.

• Pushing evidence-based grantmaking beyond the realm of evidence:  One foundation respondent to me suggested that the Obama Administration is pushing the evidence-based decision-making perspective beyond what is common sense.  The focus on evaluation, she noted, conjures up academics and consultants evaluating interviewees on expensive contracts, often relying on bad data that don’t tell you much that you really want to know.  So, as a funder, she is interested in funding not groups with reams of evaluations purporting to prove the rightness of their ideas, but “grantees that have a sense of what they want to accomplish, some specifics about how they know whether they are making progress, and how they might adapt given what they might learn.”  The sense that so much of what foundations are doing in their grantmaking gets turned into opportunities for the evaluation community is disconcerting.  Our sector is getting increasingly focused on the academic or quasi-academic parts of our work and giving diminishing attention to the core work of nonprofits – not their service delivery, but their roles as the democratic infrastructure of our communities.

• Board culture:  We don’t often talk about the role of foundation trustees, but often trustees have an even quicker fix orientation than foundation executives and staff.  One respondent bemoaned the tendency of board members to fund – and fund again and again – their favorite personal charities and friends or to focus on personalities rather than organization and infrastructure as the basis for putting money into a community.  A funder added that a problem is that her board is focused often on new grantmaking, so that their ability to engage in learning from existing grants – mistakes or otherwise – is often compromised.  The boards are players in the arena of foundation mistakes.

• The power imbalance: Foundations have a significant power imbalance over their grantees.  No news there.  But the power imbalance is exacerbated when foundations fool themselves that they are undoing the power imbalance and switching from “funder” to “partner.”  Interestingly, one respondent pointed to the Northwest Areas Foundation approach to making the switch as unwittingly exacerbating the power imbalance.  Rather than inducing community organizations to design and submit proposals for funding, by positioning itself as a partner in the Community Venture program, NWAF was seen as a dominant player in community organizations’ thinking about the design of their initiatives rather than groups making their own decisions.  In fact, NWAF crafted new organizations to carry out its initiatives rather than building off of the existing nonprofit infrastructure in the Community Ventures communities.  Although NWAF has owned up to the results of its program and its flawed design, the Community Ventures initiative has been called by one of the respondents, “NWAF’s $100 million mistake,” or as another person put it, “a $100 million disaster.”  NWAF may have learned from its mistake, but by bypassing the existing nonprofit infrastructure, it was a very costly mistake.  Another respondent suggested that the power imbalance was something of a class imbalance as well: “This general difference between foundations and nonprofits is definitely a challenging barrier to address. I think the “class divide” is exaggerated by an unfortunate attitude that is held by many funders that nonprofits are in a different class – beyond the socio-economic issue/almost a caste difference . . . So it is almost a ‘class on class’ issue.”  This leads to an unfortunate tendency of foundations, when acknowledging mistakes, to subtly attribute the mistakes to the foundation grant recipient not being sufficiently ready for the foundation’s program.  When the Hewlett Foundation suggested that the failure of its comprehensive community initiatives program was a shared responsibility between the foundation and the grantees, the description seemed to be that the community just wasn’t prepared to handle what the foundation was bringing.

• The foundation business model:  One former grantmaker suggested that organizations in our economy learn from mistakes mainly to be competitive.  There is little competition in the structure of philanthropy that presses 100,000 grantmaking foundations to dig into the process of learning.  The foundation business model is at its core to spend its 5 percent required minimum qualifying distributions and to generate sufficient earnings on its assets so that it can maintain that spending level without digging into its corpus.  In a surprisingly sharply worded critique, this former grantmaker said that spending money doesn’t require learning at all, that in fact, learning can be counterproductive for getting money out the door. It’s a stark comparison to the investment that foundations make in their financial investment strategies – comparing their earnings to other foundations, holding their money management people accountable for good investment results, and changing money managers when they don’t perform. It’s almost an argument to call for foundations to spend money faster than the molasses-fast 5 percent annual outflow, rather than worrying about maximizing returns so that the corpus is held harmless or grows. Another funder said the same:  “The accountability mantra of being ‘fiduciary first’ virtually automatically implies a defensive posture, that protecting assets for future mission trumps risking asset investments in programs for today’s mission achievement.  Thus, the culture of risk management and compliance is the lens that drives the organization.” Imagine if foundations devoted the money they currently put into learning from their investment experience into learning about the fields and programs they invest in through their grants.

On what foundations can do to create the potential for recognizing and learning from mistakes . . .

• Inviting criticism:  We don’t mean the criticism that typifies much of the grantee evaluation currently in vogue that foundations purchase from nonprofit and for-profit consulting firms.  This is rather, engaging communities and fields to debate the kind of grantmaking and the rationales for the grantmaking that make a real difference.  The long process of some foundations coming up with big ideas is too often devoted to top executives selling the board on the initiatives they have conjured up rather than culling the community for open critical feedback.  The respondents in our survey debated whether large foundations or small foundations are better at being open to and listening from critical feedback that says, “You’ve erred.”  One small foundation executive e-mailed, “I think a lot of our larger foundation colleagues (Ford, Kellogg, Casey, etc.) could learn a lot from those of us who are smaller, maybe rural, who try our hardest to be good listeners first and foremost and be willing to hear the good, the bad and the ugly – even if it relates to us.” A nonprofit leader confirmed this, saying, “I think too many funders don’t ‘know’ nonprofits in a ‘friend’ way so they can’t really learn from them. The good program officers do seek to bridge this divide, but I think they struggle with it because they don’t have the real rapport with the organizations – it’s too arm’s length.”  The call is for learning communities that allow for the sharing of mistakes – and hopefully without retribution for groups that both share mistakes and point out the mistakes of the funders.

• Right-sized grant reporting:  Although respondents described the challenge as “right-sized,” they also described the problem of generating grant reporting that encourages honesty and reflection.  But, as one respondent reported,“Even with SOME foundation reports starting to build in some of those questions in their reporting forms, I don’t believe most nonprofits feel they can be as open and if they do share, I’m not sure that the foundations then will use the info that goes against any part of a strategy hypothesis that they are actually driving.”  Right-sized grant reporting needs a process on the foundation side that is open to feedback that suggests the foundation might be wrong.

• Letting nonprofits develop their own plans for action and letting them exercise self-determination:  The NWAF program and many other comprehensive community initiatives purport to induce communities to create their own plans of action, but that’s not the reality on the ground.  They tend to be foundation-generated efforts which nonprofits can audition for and hope to be cast with speaking roles, but not authentically drawing on communities for their own program ideas and designs.  If we think about nonprofit grantees – and more particularly, the communities they serve – as an infrastructure of small “d” democratic organizing as opposed to test tube venues for foundation ideas, foundations might be doing more for social innovation than by gathering nonprofits for foundation-designed initiatives in which nonprofits feel like they’re always auditioning.

• Working through affinity groups for field learning:  Affinity groups and less formal networks of foundations could be venues for collective learning, perhaps fostering honesty about mistakes. Both here and in a previous column I’ve written, the obstacle is that affinity groups often don’t do this, or as another respondent told me, “Collective learning is unfortunately lacking in those forums.”  As one foundation commentator said, “the more they turn into show and tell/PR versus any true space of reflection, challenge, learning, the less value I think they have.”

• Changing behavior as a result of learning from mistakes:  How do you know that a foundation is learning?  As one grantmaker suggested to me, it learns by showing that it can change its behavior as a result of incorporating the lessons that it learned.  But it’s hard to find clear evidence that foundations have learned from mistakes in their grantmaking, or perhaps that they haven’t taken away the wrong lessons by misinterpreting the evidence.  It requires a modesty and openness.  As one foundation board member reminded us, learning in general, much less learning from mistakes, is an evolving process.  Today’s lesson and truth is tomorrow’s new mistake.  It’s a rare foundation that will own up to and announce changes in its strategy as a result of having to acknowledge the plain reality of an expensive mistake.  Here’s what NWAF announced candidly in its reassessment of its completely well-intentioned but clearly mis-designed Community Ventures program:

• We have returned to our roots as primarily a grantmaking institution, rather than designing and operating our own programs.

• Instead of initiating new community-based organizations, we make grants to existing proven and promising organizations working to reduce poverty and build sustainable prosperity within our region.

• We have embraced the need to listen well and conduct ourselves with humility, recognizing that the greatest wisdom about building prosperity resides within communities themselves and within the organizations we fund, not within the Foundation.

• We have recommitted ourselves to the idea that no funder can afford to go it alone, and we actively seek collaborative opportunities.

• We’re striving to communicate more clearly and more regularly with our grantees and to articulate our mutual expectations more precisely.

• We now directly consider the question of risk in all our funding decisions – not in order to shy away from risks worth taking, but to assess this dimension thoroughly on the front end.

Ultimately, however, it is the recognition that foundation modesty helps foundations avoid mistakes that not only cost money, but often don’t lend themselves to learning or even end up contributing to disrupted community dynamics.  There are real people in those communities that some foundations like to experiment with.  There may be naturally occurring program evaluation models, but in real life, when a foundation offers a treatment to community X and withholds it to community Y, especially when the most useful thing might be to offer communities some resources to develop and strengthen their organizational and community infrastructure, all that is being done is picking control communities that won’t be receiving foundation help anytime soon.