There are 10,000 grant-making trusts and foundations in England and Wales, and the latest annual figures show the biggest 300 account for 90 per cent of all their giving, which amounted to £2.4bn out of total private giving of £17.5bn. Despite its size, it's a sector that is generally averse to publicity.
Last month, however, two publications threw an unaccustomed spotlight on foundations. The first was Supporting Social Change: A New Funding Ecology, a report by the community interest company Collaborate, commissioned by the Big Lottery Fund and the Calouste Gulbenkian Foundation. Its main argument was that independent funders were inhibiting the systemic change of social support in the UK by failing to collaborate as effectively as they might.
The second, in far more outspoken language, was a blog by Jake Hayman, chief executive of the Social Investment Consultancy and a trustee of the 69th-biggest foundation, Lankelly Chase, who asserted that foundations were bad at their jobs and not fit for purpose, and that he was "done" with them.
A day later he posted a second blog saying that the first had been obnoxious. "For 10 years I watched people smarter than me saying the same thing calmly and eloquently and not getting heard, so I pushed it," he wrote. "I apologise that people trying to do the right thing felt attacked... I've had a lot of nice responses, a lot of respectful disagreement and some hideous bile that made me cry. Can we call it evens?"
The two publications have given a fresh impetus to the debate about the purpose of foundations in the current funding environment, in which income from the state is harder to come by and new ways are being sought to tackle persistent social problems. Here we summarise Hayman's blog and reactions to it, and ask the leaders of three well-known foundations to outline their priorities for the sector.
THE 'OBNOXIOUS' BLOG: JAKE HAYMAN COMPLAINS...
Jake Hayman caused quite a stir in the sector last month when he posted a blog saying that foundations were not fit for purpose. "I've spent 10 years working in the charity sector and my conclusion is that the organisations that finance it are so bad at their jobs that they make the rest of us bad at ours," he wrote.
"I've been working for too long with people trying to achieve great things for the world and watching them degrade themselves at the feet of foundations whose structures turn brilliant thinkers into fundraisers and who reduce a highly complex world into amateur box-ticking. I'm done."
Hayman went on to list 19 things that foundations currently did but shouldn't. These included hoarding power within a group of people who don't devote enough time to the job; making charities apply for funding rather than seeking them out; and turning charities into perpetual beggars by providing insufficient or short-term funding.
He stressed afterwards that his intention had been to get more foundations thinking about how to do things the right way. "The aim of the blog was to add some urgency to conversations about radically improving the system we use to finance social change," he says. "There are already some brilliant people and great reformers in the foundation world, but they need more support - and the sector needs more urgency."
Hayman says that change will happen in foundations only when there is a shift in their relationship with grant seekers. Instead of "benevolent foundations" on the one side and "grateful beneficiary charities" on the other, he says, there should be a shift towards partners working towards a joint vision.
He believes that a model needs to be developed in which the concepts of generosity and gratitude are removed. "I hope a foundation will step up and commission it," he says.
Hayman says that foundations also need to think about taking on more responsibility for the initiatives they fund.
"The way it works at present is that there is a lot of de facto collaboration where eight different foundations each give an organisation 10 per cent of what it needs, without really joining up or anyone taking real risk or responsibility for success or appreciating that their de facto collaboration might leave the organisation under-funded and without stability."
He acknowledges that the status quo might not be the fault of foundations themselves, but says the system is broken and they all need to think about changing it.
...and prompts a fresh debate
Hayman received 30 responses to his blog, including comments from the Association of Charitable Foundations and Caroline Mason, chief executive of the Esmee Fairbairn Foundation, which dispensed £32.4m in 2012.
Mason wrote that one of the reasons foundations sometimes came across as defensive was that having to reject applications daily because of limited funds was a "dispiriting pastime".
Responding to Hayman's point that some foundations cared only about how their money was spent rather than whether genuine social change had been achieved, Mason wrote that some foundations did not see themselves as agents of social change, and this was a positive because such foundations "provide the bread-and-butter funding that is currently about the only thing preserving the very survival of many communities around the country".
In response to Hayman's call for foundations to set concrete objectives to achieve change within a fixed timescale, Mason wrote that although it might seem frustrating to those in the fields of entrepreneurship and innovation, having long perspectives and time-frames was essential for foundations engaged in campaigning work.
But Mason agreed with Hayman that foundations' processes needed improving; she wrote that they should be clearer and more transparent about their funding priorities, develop more flexible and trusting ways of funding, provide stakeholders with better information through open data and rebuild their grant-making processes in a way that recognised the importance of applicants in delivering the change both parties wanted to achieve.
A plea for long-term thinking: Sara Llewellin
Sara Lewellin (right) first became a social justice activist at the age of seven – thanks, she says, to her involvement in the church and the Brownies – and has worked in the voluntary sector for the past 30 years. The longest-standing member of her foundation’s board has served for 40 years and that person’s mother served for 50 years when she was a board member.
Llewellin, chief executive of the Barrow Cadbury Trust, which dispensed £3.6m in the year to July 2013, believes that a long-term vision is something too many foundations lack. This is because many of them have fixed terms for trustees, she says; two terms of three years is common practice.
"There are a lot of voices in the sector that promote fixed terms of governance," she says. "But for long-term structural change work, that’s not helpful, because people come on for what usually amounts to six-year terms and it takes quite a while to find your feet unless you’re very engaged in the work. Then, before long, you’re gone again."
Llewellin says that the larger foundations tend to fill their boards with people who have lots of expertise, but rarely share a vision and values with their co-trustees. She says that advocates of fixed terms of less than five years claim this makes boards more diverse, but the downside of such a diversity of perspectives is that staff in foundations are often left unable to anticipate the decisions their boards will take. Another drawback is that sometimes the trustees cannot agree on what they want to achieve, with the result that charities are made to go through lengthy application processes, only to be told they will not be receiving funding after all.
Short trustee terms also make it hard to collaborate with others or build movements, she says. Participating in Changing Minds – an initiative set up by funders including Barrow Cadbury to improve attitudes towards immigration – taught her that it was impossible for Barrow Cadbury to count on other organisations to collaborate with it on long-term projects because none of the other funders could guarantee they would have the same priorities in five or 10 years’ time.
Collaboration often isn’t the best approach for foundations anyway, Llewellin says, not least because it is usually costly. "The word ‘collaborate’ is bandied about as if by definition collaborating will bring about better outcomes," she says. "It’s tosh, it really is. You should employ it only if it’s value for money, and you need to be disciplined about working only on collaborations where you can put in your share of the work and stay the course until it is bearing fruit."
Collaboration can also be self-indulgent, she says, referring to foundations that she says choose to collaborate with others because of what they can learn from the process, rather than because they believe it is a more effective way of bringing about social change. Llewellin says this is not a good enough reason to collaborate, and she believes it is in any case impossible to work in foundations – whether in collaboration or as a stand-alone funder – without learning something every day.
Llewellin believes that public trust is a major issue for the whole sector, including foundations. She says civil society is not adequately conveying to the public the extent to which it enriches lives and environments or the legitimate role it has to play in holding governments and institutions to account. She also believes foundations need to put more effort into instilling trust in the charities with which they work and says that the best way to go about this is for funders to streamline and simplify their processes, act in a more transparent way and be willing to share more of their assets, such as office space or contacts.
She says she understands why the Charity Commission has repeatedly said that trust is an important issue for the sector, but she does not know what the solution is.
Improving trust won’t be achieved by one grant-maker operating in isolation, Llewellin believes. "We have a saying, which I nicked: contribution, not attribution," she says. "No foundation could possibly attribute change just to their own contribution. They’d have to be potty."
The case for holistic funding: Julian Corner
Reduced government spending means that foundations should now have a role in influencing the state to spend money where it will have the biggest impact, says Julian Corner (right), chief executive of the Lankelly Chase Foundation, which dispensed £5.7m in the year to March 2012. Gone are the days when their main job was to find ideas that the state could later help to expand, he says.
"Foundation money is a drop in the ocean compared with public money, and a lot of charities we fund depend on state money," says Corner. "Independent charitable money is not enough to make up the difference between how state money is spent and what charities are trying to achieve; so if we want charities to thrive, a role for independent money is to generate the ways of working that will shift the way public money is spent.
"There is a big push at the moment to find a way of spending less money on crisis services and more on early intervention. But crisis services still need to exist because there are people in crisis."
So how do you shift that money? The most obvious way is by funding research that demonstrates the impact of early intervention, says Corner; but foundations also need to get involved in identifying where the demand for crisis services is coming from. Lankelly Chase is funding Advice UK, an umbrella group for legal advice centres, to try to understand why people facing severe and multiple disadvantages reach crisis point. It will then feed that information upstream to providers offering services that people might have accessed before their problems deteriorated.
"It is not enough to say we need to spend more on early intervention, because there is a finite amount that can be spent on that," says Corner. "So rather than just thinking in component parts, we need to think in a whole-system way and help fund the thinking that joins up the dots."
Corner is also a proponent of what he calls "whole-place approaches", by which he means understanding the services operating across a community and how they interact, rather than just funding projects in multiple communities nationwide. "Currently we might fund part of a project in one community without any understanding of the wider range of services there," he says. "But if we're really going to understand how to shift public money and how to achieve impact, then some foundations will have to get involved in examining how issues play out in a whole community."
The examples he cites of initiatives that already do this include: the Early Action Funders Alliance, a network of funders working with local authorities to try out methods that will help shift public funding towards earlier action; the West London Children's Zone, which works in neighbourhoods where young people are struggling with education, employment, and crime and gang issues; and the Big Lottery Fund's Headstart and Fulfilling Lives programmes, which Corner says are working with whole areas to offer services to everyone with particular kinds of need.
Spreading good practice: Andrew Barnett
One of the main misconceptions people have about foundations is that they are funders of the voluntary sector rather than being part of it, says Andrew Barnett (right), chief executive of the Calouste Gulbenkian Foundation, which dispensed £1.6m in 2014. He says few people realise foundations are charities in their own right and that they have their own missions and moral imperatives to take into account.
Rather than seeing foundations as funders and charity beneficiaries as the change-makers, Barnett thinks of the relationship as a partnership in which both are equally interested in bringing about change. "Calouste Gulbenkian did not say that we should go and give his money away," he says, referring to his foundation's founder. "Rather, his intention was that we should benefit all humanity to the greatest extent possible.
"We don't have a duty to the organisations we fund but rather an interest in how they operate and their capacity for meeting the needs of beneficiaries over the longer term."
Barnett believes that foundations should focus more on identifying and playing to their unique strengths. "We all need to concentrate on what we're best placed to do, but that differs over time depending on the challenges you are facing and the other organisations also active in the area you're working in," he says. "So understanding that is a challenge."
Barnett says that foundations need to move away from just funding projects for limited periods of time without considering what change they want to produce in the long term. He says they should think about what is going to happen to initiatives once their funds have been spent, and might consider approaching other foundations that have the expertise to support later-stage initiatives and asking them to support the project as it enters its next phase.
Read a blog on this subject by Dawn Austwick, head of the Big Lottery Fund