Caroline Hartnell

‘High risk/high gain? Opportunity, risk and global development’ was the topic for discussion at a panel discussion in Belfast on 5 June preceding the EFC conference which started the following day. This was also the topic of the special feature in the recently published June issue of Alliance, and the session was facilitated by guest editor Peter Laugharn of the Firelight Foundation. Brief reports from two surveys of foundations’ and philanthropists’ attitudes to risk (risk-taking is clearly a hot topic for foundations at the moment!) provided some context for the discussion.

The general consensus seems to be that most foundations are not very willing to take risks. An EFC survey of its members found that foundations mostly feel that risk should be part of foundation programming but very few take risks in practice, reported  Barry Knight of Centris – a phenomenon the report writers, of whom Knight is one, call ‘cognitive dissonance’. ‘People are fooling themselves talking about supporting innovators on the frontiers of change,’ he said. Smaller foundations and foundations involved in social justice seem to be more willing to take risks.

One surprise coming out of interviews with 25 philanthropists commissioned by the Rockefeller Foundation following November’s Bellagio Summit was that new philanthropists appear to be more risk-averse than others. One possible explanation is that people coming from the private sector, where they have clear measures of success, become more risk-averse, preferring to forgo opportunities when they don’t understand the risks involved. Weighting of risk over opportunity would be easier to overcome if there was more of a learning environment, suggested Rockefeller’s Rob Garris.

How can this risk aversion be overcome? Panellists Stephen Pittam of Joseph Rowntree Charitable Trust (JRCT) and Lisa Jordan of the Bernard van Leer Foundation agreed that foundations not taking risks are not doing their jobs properly.

Who is empowered to take risks?

Lisa Jordan homed in on the way foundations operate. Who is empowered to take risks, she asked. Family members, board members and CEOs are empowered to take risks; programme officers are not. We need to get rid of hierarchy, get rid of middle management, she said. We need a learning rather than a hierarchical culture. We should put programme officers in the field so they have direct experience of risk.

Stephen Pittam agreed about the importance of these issues. At JRCT, he said, the relationship between board members and programme officers is very close, and board members also meet grantees. Having an activist board who know what they are doing is crucial for a risk-taking culture. ‘Why haven’t we been challenged by the Charity Commission recently?’ their board chair asked on one occasion. ‘What are we not doing?’

Rob Garris, too, felt the need to create stronger relationships between programme officers and board members so programme officers can bring risky ideas to the board. Barry Knight talked of breaking down the barriers between foundations and grantees – ‘funding with’ rather than ‘funding over’.

The importance of communications strategy

Stephen Pittam emphasized the need to communicate clearly that the foundation is willing to take risks. ‘Foundations should be shouting from the house tops that we are in a position to take risks,’ he said. On JRCT’s website, ‘we place ourselves deliberately at the cutting edge of difficult and contentious issues. We want to be on the outside track with new, innovative and creative thinking. We need to give out that message.’

Several other session participants made the point that if things go wrong for a foundation, it needn’t be disastrous. If foundations take risks, they need to be prepared for the possibility that it won’t work out, and know how they will respond if it doesn’t. Communications strategy is key. ‘We don’t do anything we don’t think is right and important,’ said Pittam. ‘We don’t go beyond our comfort zone. And we would always stand alongside our grantees if there are difficulties.’

Pittam also made a plea for unfashionable grantmaking: you need to have the facility to be a responsive grantmaker, he said. ‘Social change comes from people on the ground with a passion to do something, not from foundations.’ He cited their High Pay Commission initiative: the idea came from others but JRCT put in £100,000, and it has done a huge amount in terms of moving the dialogue. Being a responsive grantmaker goes with signalling risk tolerance: you are reaching out to those with risky ideas to come to you.

How can foundations be persuaded to focus more on opportunity? Rob Garris mentioned that the Rockefeller Foundation has three phases of any initiative: search, development and execution – and the first of these is about looking for opportunities.

Don’t build logframes was one suggestion from Lisa Jordan. Tools matter, she said, and the idea that you can predict the outcome before you start is inimical to risk-taking.

Is impact measurement getting in the way of risk and innovation?

A similar issue was raised by Lisa Philp of GrantCraft: is impact measurement getting in the way of risk and innovation, she asked, resulting in foundations operating in a more constrained way? But Jordan didn’t agree here: in her view impact measurement gives foundations opportunities to adjust their course on the basis of evidence. In fact it empowers foundations to take risks by allowing them to see how things are going.

But Stephen Pittam wasn’t so sure. JRCT funded an organization campaigning for a freedom of information act for 18 years before the legislation was passed and it was another three years before it was implemented. After 25 years, the MPs’ expenses scandal came out because of the existence of the act. At what point would you have evaluated this funding, he asked. JRCT trustees stuck with it because they thought it was important.

Where would we like to be in ten years’ time?

Lisa Jordan would like to see a shift in awareness about risk being part of foundations’ DNA, an understanding that big foundations are there to solve big problems. Rob Garris would like to see foundations to see their role as constantly scanning the globe for opportunities and organizations wanting to create change. Barry Knight didn’t want to see ‘loads of toolkits that don’t work’.

He also raised a note of caution: do foundations want change or do they want to administer the status quo, delivering the social services desired by society? Given their origins, thought Terry Odendahl of Global Greengrants Fund, it might be more realistic to see them as vehicles for maintaining the status quo.

Caroline Hartnell is editor of Alliance magazine

Click here to see more reports from the 2012 EFC conference.