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Kathy Reich

Weaving Nonprofit Capacity Building Into Philanthropy: An Interview with Kathy Reich

Kathy ReichIn today’s Social Velocity interview, I’m talking with Kathy Reich, Director of Organizational Effectiveness Grantmaking at the David and Lucile Packard Foundation. Kathy leads a cross-cutting program to help grantees around the world improve their strategy, leadership, and impact. Her team makes grants on a broad range of organizational development issues, from business planning to social media strategy to network effectiveness.

She also manages the Packard Foundation’s grantmaking to support the philanthropic sector. She has been with the Foundation since 2001, and previously held positions in the Organizational Effectiveness and Children, Families, and Communities programs. Prior to joining the Foundation, she worked in a non-profit, on Capitol Hill, and in state and local government in California.

You can read other interviews in the Social Velocity Interview Series here.

Nell: There is often a chicken or the egg scenario in the nonprofit sector where nonprofit leaders are hesitant to tell funders their real struggles and needs for fear of appearing unworthy of investment, and philanthropists are hesitant to stick their noses in the business of the nonprofits they fund, so organizational capacity needs are not openly discussed or addressed. How does the Packard Foundation uncover the organizational needs of your grantees and what would you advise other funders to do in order to have more open and transformative discussions with their grantees?

Kathy: Well, I try not to tell other people—funders or nonprofit leaders—what to do! But I can tell you what works for us at the Packard Foundation. First, we encourage each of our program officers to learn about the organizational strengths and challenges of their grantees, and to weave capacity building into grantmaking strategies. That’s a big part of the work of the Organizational Effectiveness team here at the Packard Foundation.

But we also have a separate Organizational Effectiveness (OE) program, staffed by its own program officers and with its own budget, to help grantee partners strengthen their fundamentals so they can focus on achieving their missions. Once a non-profit gets a grant from any Packard Foundation program, they’re also eligible to apply for an OE grant. We support a wide range of projects to promote individual and team leadership, organizational planning and development, and the development of healthy networks.

The application process is pretty simple and straightforward. It starts with a letter of inquiry where our grantee partners have to answer just a handful of questions: What are the objectives of your project and what do you expect to accomplish? How will this project support your organization in meeting its goals, and over the long term, enhancing its effectiveness? What special challenges or changes have caused your organization or network to focus on management and organizational issues at this time? How do you propose to use Foundation funds? Who from your organization’s staff and board has made the commitment to lead the project?

Here’s the most important part of our approach: We work very hard to be responsive to the needs of our partners. We never say, “We think you need a strategic plan, and that’s the only thing we’re going to fund.” We listen to the grantee’s assessment of their strengths and challenges, and serve in a coaching role to help them develop the OE project that best meets their needs.

Folks can read more about the Organizational Effectiveness program on our website, or on our wiki page, where we share resources, evaluations of the program, and other information.

Nell: Leadership development is something that is fairly prevalent in the for-profit sector – it’s understood that good leaders need coaching and support along the way – but leadership development is rarely supported in the nonprofit sector. Why do you think there is that disparity and what do we do to change it?

Kathy: I think you’re right — the lack of investment in leadership development and talent management in the nonprofit sector is a significant issue. We don’t have any shortage of talented, passionate people entering this sector. But I believe that we lose too many of them before they rise to senior-level leadership positions.

Some of that brain drain happens for financial reasons: people are staggering under the weight of educational debt, or they’re lured away by more lucrative career prospects in the private sector. But much of the loss of talent is preventable. People leave because they feel burnt out and undervalued. They can’t forge career pathways and can’t access meaningful professional development. They sometimes have lousy managers. Their jobs don’t offer opportunities for promotion, or sufficient work/life/family balance.

That is all stuff that the nonprofit sector can fix. As a sector, we can even tackle some of the thornier issues around compensation and educational debt. And funders can lead the way. But philanthropy is not doing that. Rusty Stahl at the Talent Philanthropy Project, a Packard Foundation grantee partner, points out that between 1992 and 2011 foundations spent, on average, about 1% of grant dollars on nonprofit talent development. I’m not sure why there’s been a lack of investment in leadership development in the nonprofit sector over time — especially when virtually everyone seems to agree that effective leadership is one of the keys to lasting social change.

I do see some glimmers of hope. In the OE program last year, 21 of the 86 grants we awarded focused on leadership development, including projects that invested in interventions like executive coaching, board development, succession planning, and executive transition at key grantee organizations. And a number of efforts are underway throughout the Foundation to support existing and/or emerging leaders in the issue areas where we work. Clearly, though, much more is needed.

Nell: There has been a concerted effort in the past year to overcome the “Overhead Myth,” the idea that nonprofits should spend as little as possible on “overhead” (administrative and fundraising) expenses. But there is still much work to do before that idea becomes mainstream in the philanthropic sector. How do we change funder (and nonprofit leader) thinking about overhead?

Kathy: I’m a fan of so many leaders and organizations who have spoken out on this issue, including Packard Foundation grantee partners like Guidestar, California Association of Nonprofits, and Grantmakers for Effective Organizations. They’ve done a great job of making a research-based case that arbitrary, low overhead rates don’t capture the true cost of delivering non-profit programs and services. I think that there are a couple of common-sense things that funders and nonprofit leaders can do to keep this debate at the forefront of people’s minds.

First, prepare real budgets. If the funder tells you, “You can only have $25,000 for this project,” that’s fine. That’s their budget. But submit a budget for the full cost of the project, including your personnel, facilities, and other costs of doing business. Let them see what their funding covers, and what it does not. Be honest if you do not know where the rest of the money will come from. At least it will spark a good conversation with your funder about the gap, and about your real costs. Most funders do not penalize honesty. If the funder does penalize honesty, their money probably is not worth your trouble.

Second, define what goes into your overhead rate, and stick with it. Many funders have a “rule” about acceptable overhead; 15 percent, 10 percent, even 5 percent. But most do not have a standard definition for what’s included in that rate. You should have one. Define it, calculate it, and then defend it.

Nell: Philanthropy is a very personal and values-driven thing, but at the same time we need to funnel more philanthropic money towards the most effective solutions. Do you think it’s possible to get more philanthropists to give based on results rather than interests and values, or can we somehow better combine the two drives?

Kathy: I think combining values and a focus on results is not just desirable — it’s essential. None of us goes into social change work with a completely cool, dispassionate lens. We go in with passion. We want to make a difference. We bring our whole selves to this work. That’s what makes it wonderful, and that’s why we stay in it.

At the same time, resources are limited — money, people, time — and we have to be sure they’re being well-spent. Ideally, we want to make sure those resources are being better-spent than they could be on other endeavors.

At the Packard Foundation, we try to craft a balance. Our mission—to improve the lives of children, families, and communities, and to restore and protect our planet—derives directly from the values and beliefs of our founders. The way we go about that work is deeply rooted in five core values, which also come from our founding family — integrity, respect for all people, belief in individual leadership, commitment to effectiveness, and the capacity to think big. But we also are committed to scientific rigor, evaluation, and most importantly, learning. We care not only about what grant funds accomplish, but also about how we do that grantmaking, engage with grantees and improve over time. You can read about some of what we’ve accomplished over the years on our new digital timeline.

Photo Credit: Packard Foundation

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