Reshaping the Business of the Board: Grantpickers or Strategic Thinkers?

Boardroom b+w

If the job of the foundation board is to oversee strategy and determine the effectiveness of the organization in achieving its goals, isn’t it also the board’s job to pick the right grantees?

Probably not.

For large foundations that want to achieve big audacious goals, selecting individual grantees is probably not the best use of their wisdom. Therein lies one of the strange dichotomies of foundation board governance—a tension that has to be carefully managed by foundation CEOs.

When I started my career in philanthropy, all the foundation boards I knew of reviewed dockets—lists of staff-recommended grants for that quarter. (It’s interesting that philanthropy borrowed the word ‘docket’ from the legal profession, where it is ubiquitously used to refer to ‘cases to be tried,’ as well as calendaring.) Back in the day, those boards discussed each grant and gave a thumbs up or down based on whether the staff write-up was sufficiently compelling. The board’s main job was to approve grants.

But times are changing.

The Center for Effective Philanthropy’s recently released report, Benchmarking Foundation Governance, offers a small peek into the changing nature of governance at foundations. Improving strategy, measurement, and effectiveness requires that foundation boards conduct their business differently. Most still adhere to a traditional calendar of four meetings per year (at an average of four hours per meeting, for a total of 16 hours of full board face time). But discussions about theories of change, adaptive evaluation, and strategic planning, which are at the center of thought leadership in the field, may be taking a greater share of time in foundation boardrooms.

Slightly more boards report a focus on foundation strategy (77 percent) than on approving grants (67 percent). Clearly boards do both, but I suspect the balance has evolved over time.

I was pleased to see that 59 percent of foundations delegate some grant decision-making to staff for grants below a certain dollar level. Even more positive is the finding that the median dollar max was an impressive $125,000. This approach to board work is both a wise time management tool as well as a demonstration of trust in staff expertise. Focusing board discussions on strategy and reserving grant discussions for those above a certain threshold prioritizes board time on the big questions and the big bets. Individual, large-scale grantpicking is a time sink that strategic boards can ill afford.

But boards also cannot get too far removed from the business of the enterprise. Since most foundations achieve their goals primarily through relationships with external organizations, how can boards be divorced from the task of selecting the right grantees?

The fact that 39 percent of large foundations have board discretionary funds from which individual board members can make grants with little or no staff involvement may be another tool that helps manage the tension. Board members may use those discretionary accounts like mini-venture funds to go toward smaller organizations they identify that may not yet pass rigorous due diligence. Or they may select grantees working on longer term issues in fields in which the board member has particularly deep content knowledge. Practically speaking, discretionary funds might also serve as a release valve, allowing board members to exercise their grantpicking impulse without having that activity take up too much of those precious 16 hours of face time.

In any case, more study of philanthropic governance would provide insights on how organizations manage these tensions between grantpicking and strategic thinking. How do foundations get the best out of their boards? Behind closed doors, interesting innovations in governance may well be occurring.

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