Kathleen Enright, Executive Director, Grantmakers for Effective Organizations: Embracing Change As the Path to Improved Performance

April 7, 2004
Kathleen Enright, Executive Director, Grantmakers for Effective Organizations: Embracing Change As the Path to Improved Performance

In an environment where devolution and shifts in public-sector funding of the nonprofit sector have become the norm, even as the demand for social services grows apace, the need for nonprofits to operate efficiently and effectively has never been greater. But obstacles to improved nonprofit performance — limited human and financial resources, rapidly changing technologies, and increased competition, among them — have proved stubborn and difficult to overcome.

In February, Philanthropy News Digest spoke with Kathleen Enright, executive director of Grantmakers for Effective Organizations, a community of more than six hundred grantmakers dedicated to building strong and effective organizations, about the link between organizational capacity and effectiveness, the difficulties inherent in measuring the performance of nonprofit organizations, the role of funders in improving the effectiveness of the nonprofit sector, and the organization's theory of change.

Before becoming GEO's first full-time director in 2001, Enright served as the group director, marketing and communications, for BoardSource, formerly the National Center for Nonprofit Boards. She also has served as a project manager for the National Association of Development Organizations Research Foundation and as a communications specialist for Lexmark International. She received a bachelor's degree in English from the University of Illinois at Urbana-Champaign and a master's of public administration from George Washington University.

Philanthropy News Digest: Tell us about your background.

Kathleen Enright: I've spent most of my career not only in the nonprofit sector, but in organizations that focus on improving nonprofit performance, which is my personal passion. In college I had a chance to work at both a well-run nonprofit and at an abysmally run nonprofit. I knew then that I wanted to play some small role in helping social-purpose organizations achieve their missions. This was at a time when the first graduate programs in nonprofit management were appearing. I got my masters in public administration from George Washington University, which included some coursework in nonprofit management.

Then I went to work for a small membership association that was attempting to identify best practices in rural economic and community development and disseminate those practices to its membership. After that, I had the good fortune to land a job at BoardSource, a D.C.-based organization that produces some of the most widely used resources on nonprofit governance. I spent six years there and enjoyed every minute of it. Then, in 2001, a recruiter from GEO called indicating that they were looking to hire the organization's first full-time executive director, and it just seemed like a perfect opportunity. Since GEO's mission is to help funders as they support nonprofit performance, while at the same time striving to model effective practice as an organization, I often joke that I feel like I'm acting in a play within a play. 

PND: What are we talking about when we talk about "effectiveness" and "effective practice"?

KE: Well, let me preface my answer by saying that GEO's understanding of "effectiveness" is dynamic and evolving. We do have a working definition for "organizational effectiveness," and it's not specific to foundations or nonprofits. As we use the term, organizational effectiveness refers to the ability of an organization to fulfill its mission by measurably achieving its objectives through a blend of sound management, strong governance, and a persistent rededication to achieving results.

Now, there are overlapping aspects of nonprofit effectiveness and foundation effectiveness, but there are key differences as well. For instance, many foundations are driven by donor intent, and so a key indicator of their performance must and should be the extent to which their grantmaking achieves results consistent with that intent. The Urban Institute is releasing a major study on foundation practices and attitudes about their own effectiveness that GEO commissioned and the David and Lucile Packard Foundation underwrote. And the study reinforces the heterogeneity of the foundation world and cautions against broad-brush characterizations of foundation effectiveness. For instance, the majority of community foundations believe, rightly so, that maintaining a broad grants program is very important to effectiveness, while fewer than 12 percent of corporate or independent foundations share that view.

In other words, effectiveness is contextual. But every funder must pay attention to grantee strength and performance if it is to be effective. There are many ways to be supportive of grantee performance — by providing direct grants for capacity building; by providing flexible dollars, including general operating support; and by offering non-financial assistance such as evaluation help or brokering relationships with other nonprofits.

"...Effectiveness is contextual. But every funder must pay attention to grantee strength and performance if it is to be effective...."

PND: I'd like to get back to some of those points in a second. But first, did following in the footsteps of Barbara Kibbe, who helped found GEO and still has a high profile within the organizational effectiveness movement, pose any special challenges?

KE: Barbara really is a force in the organizational effectiveness movement and the philanthropic community in general, and I was lucky that it was never my role to try to fill her shoes. When I was hired in December of 2001, her role at GEO was that of a founder, board member, and highly engaged volunteer. She had served as our board chair just prior to my arrival and had been our conference planning chair; she also had a very important "day job" as a senior program person at the Packard Foundation. But she remains an incredibly committed board member and supporter of the organization and, in fact, was the planning chair for our 2004 conference. On a more personal note, she also has been a wonderful colleague and mentor to me over the two years that I've had the pleasure of knowing her.

PND: GEO is a membership organization. Is your membership limited to funders?

KE: Our membership includes both funders and organizations whose primary members are funders — regional associations of grantmakers, other funder networks such as Grantmakers in Health or Grantmakers for Children, Youth and Families. We recently expanded our membership to include individual philanthropists more explicitly, since they are one of the largest growing segments of philanthropy and incredibly important to the sector's long-term impact.

PND: Last fall, you and your colleagues released a theory of change document that lays out, in some detail, a vision for GEO as both an organization and as "a community of grantmakers working to achieve a broader impact." What motivated you to formally articulate a theory of change?

KE: The idea first occurred to us while we were in the midst of merger negotiations with the Grantmakers Evaluation Network in the fall of 2002. Even as our discussions with the folks at GEN were solidifying our understanding of the important role that evaluation plays in overall effectiveness, we were beginning to better appreciate and articulate the duality of our own mission, which focuses on both nonprofit and foundation performance. As the merger discussions accelerated, we thought it was the right time for the combined organization — which retained the GEO name — to tackle some of these big issues and, in the process, to better articulate our role within the field. Eventually, our discussions developed into a serious strategic reexamination of our work — a process that was ably led by David Hunter, of the Edna McConnell Clark Foundation, and other members of our board, with LaFrance and Associates serving as our consultants.

PND: Did you solicit input from your membership as the document was being developed?

KE: Absolutely. It was an iterative process. The board task group created the initial draft and shared it with our full board and staff, and then integrated their input into a second draft. Then we selected about fifteen to twenty key thought leaders in the field — people like Alexa Culwell of the Charles and Helen Schwab Foundation, Gayle Williams from the Mary Reynolds Babcock Foundation, and Ed Skloot from Surdna — and shared the revised draft with them. Not surprisingly, we got a lot of terrific feedback. For example, Alexa Culwell gave us the feedback that one part was uninspired. So we took another look at it, and that's what led us to commit to being an organization that strives to both promote and model effective practice.

That draft was then distributed to our membership in electronic form last August, and in paper form a month or so after that. All along, however, we considered it a "living" document — something we might revise on an annual or even semi-annual basis, depending on the external context, any feedback we receive, and new thinking that may emerge. Most of the feedback we've received is very supportive. Yes, a few people have take exception to the tone of the piece — after all, it talks about how things in the philanthropic world need to change — and some who read it aren't comfortable with its reformist message. But we posted representative feedback to our Web site – both positive and negative.

PND: I've read the document, and it's nothing if not ambitious. Could you give us the Cliff Notes version?

KE: Absolutely. As I mentioned, we were at a bit of a crossroads, in that we were trying to figure out how and where the GEO community could have the broadest impact. And in those discussions, a couple of key questions kept coming up. One had to do with our role and priorities regarding nonprofit effectiveness and funder effectiveness. We also were struggling with the issue of whether GEO should be a membership organization — that is, an organization led by and primarily concerned with the needs of its members — or whether we should position ourselves more as a leadership organization, meaning we would be willing to take positions that might not be endorsed by a majority of our members.

Another key debate hinged on the issue of whether we should work toward improvement within individual organizations or systems change. After much discussion, we determined that limiting our work to the individual organizational level would not be sufficient to bring about the changes in the field we think are needed. So our theory of change articulates a vision in which GEO works to encourage grantmaking organizations to establish and measure themselves against a high standard for effectiveness, with an eye to improving their performance on an ongoing basis, and at the same time positions us to play a role in the broader issues of philanthropy as a system. Our hope is to provide leadership that looks beyond individual institutions to the field as a whole and encourage greater strategic cooperation among grantmakers, a more deliberate system of funder networks to facilitate this collaboration, and knowledge sharing. The work at the systems level will likely take years to bear fruit, but we think it's crucial if philanthropy is going to play a strategic role as new approaches to public problem solving emerge.

PND: Who's your target audience?

"...Funders have the clout and the leverage to catalyze large-scale improvements in the performance and efficiency of the nonprofit sector...."

KE: Right now it's organized philanthropy, but we are keenly interested in engaging new philanthropists, including individual donors. There is a fundamental link between nonprofit performance and funder impact, in that every funder has the ability to influence dozens of nonprofit organizations. At the end of the day, funders have the clout and the leverage to catalyze large-scale improvements in the performance and efficiency of the nonprofit sector. So our target audience is all grantmakers and the organizations that support them, not just our member organizations.

PND: Is the field ready to change?

KE: That's a good question. Ready or not, however, change is coming. And in many cases, funders are leading the charge. For example, Paul Brest at the Hewlett Foundation has been vocal in advocating for more general operating support. And Ed Skloot from Surdna is leading a group of funders who are looking at their own work and trying to come up with a decent standard for how foundations should act vis-à-vis their grantees.

But it's true that the kinds of changes we talk about in our theory of change document can feel out of reach to individual organizations. It's difficult to imagine how one person or one organization can contribute to systemic change. And that difficulty is compounded by the complexity and sheer size of the nonprofit sector. The good news is that there are things that individual organizations — and people within them — can do that have the potential to be transformational. One of our next steps is to try to clarify what some of those first steps might be. In our work, we're attempting to focus on those things that we have the power to change. We're encouraging the GEO community to do the same. Obviously, there are many things that funders can't control, such as the rogue executive director who embezzles funds or the media's fascination with scandal or a board that is asleep at the switch. But there's plenty that funders do have the power to change.

Application and reporting systems are one example. Like letting the punishment fit the crime, let the application and reporting requirements fit the size and complexity of the grant request or project. Reporting requirements should be both useful and situation-appropriate. There are a couple of regional associations of grantmakers that have created and are encouraging the use of common grant application forms as a way of reducing the number of hours nonprofit executives spend on fundraising. It's an important change, it's something that funders have the power to control, and at the end of the day it's one that would lead to greater efficiencies in the philanthropic marketplace. 

Another change that will increase the efficiency and impact of philanthropy is for funders to more regularly provide general operating and longer-term support. For those grantees that receive support year after year, it makes a lot of sense to move to a two-to-three-year cycle, rather than an annual one. That would decrease the fundraising burden on busy nonprofit executives and would also free up foundation staff time for other important work. Similarly, the flexible dollars that general operating support represent enable grantees to build and maintain the hallmarks of an effective organization, including a commitment to professional development, efficient technology systems, and appropriate financial management.

Another change we're beginning to see is a greater willingness on the part of funders to solicit and receive feedback from their grantees. For the last year or so the Center for Effective Philanthropy in Boston has been surveying grantees about funder performance. At this point they've built up quite a database. The really interesting wrinkle for the foundations involved, however, is that they can compare how grantees rated their performance to that of a cohort of other funders. That's new; in the past, if a foundation wanted to evaluate its performance with regards to grantee perception, the only thing it had to compare it to was its own past performance, which is of limited value. But with CEP's Grantee Perception reports, funders are able to see how they compare with their peers in areas like responsiveness, transparency, impact, and overall performance. Just recently, in fact, the Hewlett Foundation became the first foundation to make the results of its Grantee Perception Report available on its Web site. I hope there'll be more, because increased transparency and the discussion that flows from it has the power to change philanthropy for the better. It's something that both GEO and the Center for Effective Philanthropy are advocating. I applaud Paul Brest and the Hewlett Foundation for being the first to do it.

PND: I think it's fair to say that many people believe you can't improve organizational effectiveness without serious, systematic evaluation and performance assessment. But others, especially people involved in the delivery of social services, argue that those are business-school concepts best applied to organizations and activities with a clearly defined bottom line. Is that a valid criticism?

KE: I don't think so. Sure, evaluating the work that many nonprofits do is harder than evaluation in a business context, but that doesn't mean it's not doable. We have to be clear about what kind of evaluation we're talking about. Are we talking formative evaluation or summative evaluation — that is, evaluation as a learning tool, which is the way a lot of foundations talk about it, or evaluation to see whether the original project goals were achieved. The Wallace Foundation, for one, is using evaluation not as a scorecard or a way of grading their grantees, but as a way of informing their own work so that they can make smarter grants that help their grantees do better work in the future.

"...Evaluating the work that many nonprofits do is harder than evaluation in a business context, but that doesn't mean it's not doable...."

Remember, there are no perfect metrics for these things. I know many nonprofit leaders who are looking for best practice or benchmarking data that allows them to compare their organizations to others, and they all agree: Some areas are much easier to measure than others. For instance, the folks at the Roberts Enterprise Development Fund have come up with terrific ways to measure the dollar value of moving formerly homeless and addicted people into sustainable employment situations. It's not simple, but it's easier than measuring the value and impact of a musical performance.

I guess that's a long and complicated way of saying that there is an entire spectrum of evaluation. And not every grant or project should be evaluated. The important point to remember is that evaluation is a tool that can help us think about what we do and how we can do it better.

PND: How does GEO define organizational capacity? And have you seen in your work a direct link between the capacity of an organization and its effectiveness?

KE: By capacity, we do not necessarily mean that a program or organization has to scale. Our concern is with an organization's capacity to be effective, not its capacity to double or triple or quadruple the number of folks it served the previous year. Bigger isn't always better. The last thing we want to see is nonprofits chasing dollars and doing projects that aren't well-aligned with their mission because it's what a funder wants. Foundation dollars are leveraged and used much more efficiently when the recipients of those dollars have adequate capacity and appropriate systems in place to do the work — whether the organizations are small and grassroots or multinational.

PND: Are grants the only way to support nonprofit capacity?

KE: Absolutely not. From a funder's perspective, one of the best ways to support nonprofit capacity is to think through how your behavior impacts the performance of your grantees. For instance, grantmaking cycles are often set up in ways that are detrimental to grantees, and funders need to be more cognizant of whether their reporting requirements are burdensome. Similarly, there's often a lot of informal mentoring in the relationship between a program officer and a nonprofit executive, and that's something that program officers need to be aware of and foster, where appropriate. Program officers also often act as matchmakers between grantees who would benefit from exposure to each other's work. And in many cases funders expend significant resources on supporting the knowledge infrastructure of an issue or field they care deeply about. The Annie E. Casey Foundation's Kids Count database is a perfect example of that, and I know that Casey grantees value it enormously. Most of these things do not involve the direct transfer of dollars to specific grantees.

PND: Most people would agree that there's a power imbalance between funders and grantees. You mentioned the Center for Effective Philanthropy's activities around its Grantee Perception Survey as one way to level the playing field for grantees. Are there other mechanisms or models out there designed to, if not level the playing field, facilitate more and better dialogue between funders and grantees?

KE: There will always be a fundamental imbalance in the relationship between funders and grantees. That's just reality. That said, many folks within the GEO community are doing an amazing job of building trust and creating an environment in which their nonprofit partners are comfortable sharing their successes and failures, worries and fears. Let me give you a few examples.

A few years back, the folks at the Mary Reynolds Babcock Foundation in North Carolina began to re-think the way the foundation does its work. As part of that process, they surveyed many of their grantees and asked others to participate in a series of focus groups, keeping them involved as the process unfolded. As a result, the program officers there — and these are my words, not theirs — began to treat their grantees as customers; it's more of a service approach, which is very different from the traditional approach, I think.

Then there are funders like the Edna McConnell Clark Foundation that are seeking to establish deep, long-term relationships with their grantees. In the case of Clark, the level of engagement is incredibly deep and includes everything from articulating theories of change, to intensive business planning, to detailed evaluation and reporting. The result of that kind of close, sustained interaction is that a great deal of trust is created; the grantees feel as if they are on solid ground, and the funder becomes too invested in the grantee, financially and psychologically, to walk away on a whim, so both parties can be more candid in their conversations with each other.

A final example: The Charles and Helen Schwab Foundation, in partnership with the Sobrato Family Foundation and the Peninsula Community Foundation, created something called the Organizational Capacity Grants Initiative to build the capacity of some of the major human service organizations in the Bay Area. What they did was to create a cohort of executive directors who were trying to improve the performance of their organizations and give them a lot of flexibility in how they used their grant dollars. The most exciting aspect of the program, however, was the participation of the CEOs of the three funding organizations in various peer sharing sessions, which resulted, I've heard, in the realization on the part of the nonprofit CEOs that their colleagues on the funding side had to struggle with many of the same issues they did, and at the same time allowed the foundation executives to forge closer ties with their grantees. 

So, I think the quality of the engagement and the way in which program officers treat their grantees — including returning phone calls and giving constructive feedback to nonprofits whose applications are rejected — can go a long way toward normalizing the relationship between funder and grantee.

PND: How does GEO plan to encourage and support change in the field over the next five years? And how will you know whether you've succeeded?

KE: Change is already under way in many parts of philanthropy and some of the most progressive change agents are actively involved in the GEO community. GEO doesn't necessarily need to catalyze or lead many of these efforts. In fact, success will depend on our ability to support, promote, and connect the pockets of activity and energy that crop up from within the philanthropic community around the issue of increasing impact.

"...Our success will depend on our ability to support, promote, and connect the pockets of activity and energy that crop up from within the philanthropic community...."

In terms of what the organization specifically intends to hold itself accountable for, well, that takes us back to our theory of change. There are two levels on which we plan to evaluate our performance. One is the organizational level — are there more organizations that understand the core components of effectiveness? Are more organizations exhibiting support for nonprofit effectiveness in ways we've articulated? Are more organizations providing general operating support or long-term support? We created five short-term outcomes as part of our theory of change and have established separate indicators under each outcome. We also conducted a survey of our membership last year in order to create a baseline for our efforts and asked questions like, To what extent does your foundation provide general operating support? To what extent are you engaged in capacity-building support beyond providing grants? Does your organization regularly examine its own effectiveness? The next step will be to re-survey that group every eighteen months or so to determine whether there has been any progress.

The second level is the field level — philanthropy as a system — and there we're interested in the basics, things like greater strategic cooperation in both grantmaking and knowledge creation and sharing. To that end, we've begun by looking at the fragmentation of the field and are in the process of assembling baseline data through a survey of funder networks. Funders are increasingly working in new ways through both formal and informal networks. By more effectively facilitating new ways of working together, we believe that a more rational and coordinated system of funder networks will have a direct impact on the effectiveness of the grantmakers and nonprofits they support. So success for us on this level would be if we could point, over the next five years, to the existence of funder networks that are real change agents — not only convening funders, but advocating for new ways of working, marshalling resources to important causes, and harnessing the lessons we're learning together.

I'd like to leave you with one thought, and it's this: Given the size and complexity of the societal issues that funders address, no single grantmaker, no matter how large, can achieve what it hopes to alone. So we must find new ways to combine our financial and intellectual assets, to share power and information, to breakdown traditional institutional boundaries, and to work in new ways to collectively provide a larger value to society than we could alone.

PND: Well, thanks, Kathleen, for taking the time to speak to us.

KE: My pleasure.

Mitch Nauffts, PND's editorial director, interviewed Kathleen Enright in February. For more information on the Newsmakers series, contact Mitch at mfn@fdncenter.org.