A post to Exponent Philanthropy's blog

Key Insights From This Year’s Foundation Operations and Management Report

Photo by Adeolu Eletu on Unsplash

2020 was difficult for us all. The pandemic changed the nature of work, and how funders interact with their boards, staff and the nonprofits in their communities. Despite these challenges, more than 400 members of the Exponent Philanthropy community participated in the survey informing our 2021 Foundation Operations and Management Report. We thank you—without your participation, this report isn’t possible.

Racial equity work also moved into the foreground for many funders in 2020. As Exponent Philanthropy’s CEO, Henry Berman, shared in his welcome letter:

“In recent years, we have been working to advance diversity, equity, and inclusion in our community of lean funders as well as in the field of philanthropy. The events of 2020 have brought this work into sharper focus. No matter your funding area, geographic footprint, or the composition of your board, it is critical that we all recognize the importance of building an equitable society. As funders, it is incumbent on each of us to keep this understanding top of mind as we work to create a better world in our own, unique ways. Racial equity pervades and impacts everything we do, and, therefore, the 2021 Foundation Operations and Management Report leads with this section.”

While we continue to provide important data and benchmarking information throughout the report, I am excited to share some of the new data and analysis featured in the executive summary.

Race Equity

In 2020, a greater percentage of foundations rated racial equity as somewhat or very relevant to their foundation’s mission (73%) as compared to 2019 (65%). The biggest shift came from funders moving from the not relevant category into the somewhat relevant category.

Similarly, board diversity matters. Foundations with two or more Black, Indigenous and People of Color (BIPOC) members on their board rated racial equity as much more relevant to their foundation’s mission as compared to foundations with one or zero BIPOC members on their board. Promising data points on racial equity best practices include:

  • 27% of funders’ data and planning practices are accessible to community stakeholders.
  • 25% of funders accept proposals written for other funders.
  • 25% of funders have an institutional commitment to addressing or eliminating inequities.
  • 18% of funders’ data and planning practices are driven by community stakeholders.

Staff Demographics, by Race/Ethnic Diversity

While a high percentage of foundations said racial equity was somewhat or very relevant to their mission, the racial/ethnic diversity among staff was relatively low. Consider, nearly three-fourths (74%) of participating staffed foundations had no paid BIPOC staff.

When looking at the makeup of foundation staff by race and gender combined, we found they are predominantly white and female (60%).

Two interesting trends emerged from deeper analysis:

  • Foundations that rated racial equity as very relevant to their mission had a greater percentage of BIPOC males and Black females on staff.
  • Foundations that rated racial equity as not relevant to their mission had a higher percentage of white male staff than the foundations who said it was somewhat or very relevant.

Board Demographics, by Race/Ethnic Diversity

In the past, we looked at board demographics on a board-by-board basis. However, this year we also looked at the racial/ethnic diversity across all foundation board members.

When compared to the overall U.S. population, the diversity of foundation boards is dismal. Across all participating foundations, the majority of board members (90%) identified as white. 4% identified as Black or African American, 2% as Asian/Pacific Islander, 2% as Latinx and 1% as multiracial.

Grantmaking Practices

As in past years, we asked you, our members, about different grantmaking practices—from monitoring grantee accomplishments to engaging constituents in the grantmaking process.

These various practices put foundations on a path to creative, catalytic philanthropy. For more on this topic, check out our blog post, “A Call for Creative Catalytic Philanthropy,” which highlights the power of this type of philanthropy.

Investment Returns and Mission Investing

The final section of the Foundation Operations and Management Report highlights our members’ investment practices. The 2019 fiscal year had strong financial returns, and our members were no exception, averaging 15.2%. Yet, just 18% engaged in mission or impact investing, and only 10% plan to in the next few years.

We defined mission investing as,

“Investing in companies or projects that align with the foundation’s mission and generate direct social returns in support of a foundation’s mission in addition to market-rate financial returns.”

Funders engaged in mission investing generally used two approaches: conducting environmental screens on stocks, bonds and/or mutual funds (55%); and direct investments in private companies or funds (48%).

Common challenges associated with mission investing include lack of internal capacity to dedicate to mission investing (39%), the belief that this approach will not earn the same level of returns (33%) and risk aversion (32%).

Additional Resources

The 2021 Foundation Operations and Management Report is full of useful and exciting data points. As always, keep in mind that benchmarking data is just that: a benchmark. When reading the report, consider your foundation’s mission, characteristics and goals, especially as they relate to your investment data and administrative costs. I encourage you to use this report to reflect on your foundation’s operations and management, and envision how you can grow and evolve for the better.

Members of Exponent Philanthropy can download a free copy of the 2021 Foundation Operations and Management Report. Nonmembers can purchase the report from the same link.

On March 24th, I’ll be joined by two experts in the field—Sammie Holzwarth, Product Manager of Grants & Scholarships at Foundant Technologies, and John Church, Director of Endowment and Foundation Impact Portfolio Management at Glenmede—for a discussion of this year’s report. You can register for that webinar here.

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