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Guest Post: Ruth Richardson, Co-Founder, Small Change Fund

Small Change Fund: Deceptively Modest. Quietly Powerful

“Who’s going to do it?” Phil Buchanan, President of the Center for Effective Philanthropy, posed this question at the recent Philanthropic Foundations Canada conference in Calgary. “Who’s going to fund solutions to our most pressing social and environmental challenges?” It’s a good question. He asked it because of the stark realities of the economic downturn, of governments looking to foundations to support essential services, of foundations looking to the private sector to fund innovation, of the private sector scrambling to cope with the shifts in their financial forecasts. “So who’s going to provide the investments in critical social change?”

My answer is, we are. All of us. Individual Canadians. Evidence shows that in tough times Canadians will step up to the plate with sleeves rolled up and pocketbooks open. But today’s tough times call for especially creative measures if we are going to achieve lasting social change. We face unprecedented complex problems and at no other time in history have Canadians been more connected with each other and with the rest of the world. Therein lies the opportunity.

Small Change Fund, an initiative that will launch in December 2009, is an answer to Buchanan’s question – a solution that not only makes it easy for Canadians to share resources with each other, but also gives us the opportunity to invest in local solutions in a global world.  Small Change Fund is a contemporary approach to philanthropy that harnesses the culture and power of social networking. It’s a space online where we can connect with local leaders doing amazing things to better communities across Canada. It’s a deceptively modest and quietly powerful tool enabling investment in the most high-impact grassroots action across the country. Its potential lies in facilitating a philanthropy that is at once micro and global, grassroots and open.

It’s grassroots philanthropy. Small Change Fund helps Canadians put their money into the hands of people on the ground, people who are best able to figure out and fix the problems in their communities. Judy Rebick says in her new book Transforming Power that what works in realizing transformative change is bringing communities of people together to produce something new; building a movement from the bottom up; sharing experience, knowledge and wisdom; emphasizing co-operation and consensus over confrontation and political partisanship. “Meaningful response to the environmental crisis and social injustice requires substantial, sustainable change at every level, which can only come through building power from the grassroots, from the people most impacted.” Hear, hear.

It’s open philanthropy. Small Change Fund uses the power of the Internet and new media to break down the walls of old-world philanthropy and engage everyone at their own level of ability to share with others. Each contribution combines with others to have more of an impact that we could ever have alone. It’s “bottom-up” philanthropic activism made possible by all the amazing technological tools we have at our disposal. Small Change Fund is a place where those with some critical dollars for sharing can meet people with some creative ideas for helping to make the world a better place. We open up the philanthropic process to all Canadians so they can have a hand in solving the problems they care about most.

It’s micro-philanthropy. At Small Change Fund we believe that people can make change without long studies, thick reports, and big money. Modest investments can make a profound difference. A computer, a camera, agricultural training, legal advice, a water test kit – these things can change the world. Not by themselves but in the hands of committed, passionate people trying to transform their communities. In the words of one our veteran advisors, Mauro Vescera, “After 10 years of grant-making, it has been the small grassroots projects that have stood out as the most positive initiatives. Small projects that unite local residents and give voice to important issues in their communities are often overlooked yet they are critical to moving the environmental agenda forward.”

It’s global philanthropy. Small Change Fund is part of an international alliance of micro-funders. Like us, there are others across the globe from Siberia to the Philippines to Brazil using the power of micro-philanthropy to transform their communities. We are working with them to identify global priorities, like climate change and indigenous peoples’ rights, and figure out how best to translate those priorities into local action. Our alliance is a rich resource of vision, experience, and expertise driven by collaborative energy and a shared vision of a healthy planet.

“So who’s going to do it?” I am. You are.  We are going to do it together. “And how?” By engaging in the business of philanthropy differently. By believing that people know how to figure out and fix the problems in their communities, their cities, their countries. By believing that people can make change without long studies, thick reports, and big money. By believing people want to help each other. And by making that simple. We can start something big with small change at www.smallchangefund.org. Look for us in December 2009.

Interview with Hilary Pearson, CEO Philanthropic Foundations Canada

In this, our first guest posting, we have the pleasure of a Q&A exchange with Hilary Pearson, President and CEO of Philanthropic Foundations Canada (PFC) a national membership organization for Canada’s independent grantmaking foundations.

J/S: Hilary, thank you so much for agreeing to this interview. We know our readers will be interested in hearing how Canada’s largest and most relevant foundations are faring through these tumultuous times. We’d like to start off by asking you how the global financial situation from last year affected the assets of Canadian foundations?

HP: There’s no question that Canadian foundation endowments took a hit in the last part of 2008 and early 2009. Experiences varied among our membership depending on the investment allocation formulas used, but endowment values generally went down anywhere from 15% to 20% on average.  Assets are starting to rebuild now, but it will take a while to replace lost value.

J/S: What has been the strategic response of your members to this? Has it affected the size of their grantmaking portfolio?  Have some encroached on their capital to stabilize their grantmaking efforts? Has there been any effect on multi-year commitments?

HP: We know that the response to the downturn has been at the forefront of our members’ preoccupations this year. So we decided to help by conducting two surveys, one in January and one in June of 2009, to gauge what was happening both to investments and to disbursements (grants or expenditures on charitable activities). The main conclusions from these surveys is that foundations have tried very hard to hold the line on their grants in 2009, and not to cut back, even though the investments returns have been reduced. By and large, foundations have accomplished this without going into capital unless they are recently established foundations that don’t have reserves. For them, it has been very difficult. But for most others, including some of the largest foundations in the country, the grants budget has not decreased significantly. What may have changed is strategy. There is more reluctance now to accept multi-year grant requests, or new requests. Foundations are trying to protect their current commitments without making new ones for a while longer.

J/S: We are hearing some anecdotal evidence that some foundations are broadening their non-financial contributions such as convening, organizational capacity development, and sometimes even program loans. Are your members reporting such changes to their strategic mix?

HP: Yes, I would say that there is a renewed commitment to providing assistance beyond the grant to make the best use of their resources. Many foundations were already doing it before the recession and are maintaining their efforts. Others are looking at it for the first time. There is a lot of interest in convening and getting charities and grantees together to support information sharing and perhaps brainstorming of solutions together. Some funders have taken the initiative of building more structured groups of charities and funders to collaborate on an ongoing basis.  Ideas are being floated around about sharing resources, working on projects with common goals and identifying greatest needs in the community together. One example is the effort being led by the Lyle Shantz Hallman Foundation in Kitchener which has really taken on a major role in convening local funders to think through the needs of Kitchener-Waterloo. I think this kind of activity could last beyond the recession.

J/S:  Maintaining a small operational costs to grants ratio has always been a tenet of Canadian foundations.  If grantmaking is being reduced, are you seeing a corresponding reduction in operating costs?

HP:  It’s true that Canadian foundations are very careful with their administrative costs. It is rare to see any foundation with a large staff or significant overhead. So there isn’t much to cut back from.  We have heard from our members that some of them are cutting back on travel and professional development as some of the only ways to reduce costs. I hope this is not a trend that lasts!

J/S: What about staffing? There was an article in the New York Times in the spring that indicated the major American foundations were undergoing significant layoffs. Are you seeing that here, or are most Canadian foundations recognizing that maintaining their own intellectual capital is an important longer term objective?

HP: No I don’t see layoffs happening. Again, staff size tends to be very small to begin with and many people who work in family foundations are unpaid.  But I think the commitment to people remains strong and there is reluctance to go to actual layoffs, although open positions may go unfilled. There is a commitment to continuity. But it may not be perceived as a commitment to foundations’ intellectual capital per se, but more to relationships with grantees and to community connections.

J/S:  There has been some optimism in the financial sector of permanent restructuring. Do you think there will be any lasting restructuring in the foundation world of a positive nature? What do you think legacy of this recession will be in the foundation world?

HP: I think restructuring is always a creative response to a crisis. That said, I don’t see much restructuring happening or even being necessary in the foundation community. Foundations are not created as small businesses but as organizations with a long-term view. Most boards are still strongly committed to the vision of a perpetual endowment, as were most of their donors or founders. And, unlike the United States, we have relatively few foundations that are explicitly committed to spending down endowment. Anywhere from 10% to 20% of foundations in the U.S. have such a commitment or are actively considering it. We don’t have data for the Canadian foundation community but anecdotally, this doesn’t seem to be a preferred strategy, certainly not for family foundations. So there is an instinct for preservation of things as they are (unless the crisis is truly dramatic).

On the other hand, for foundations that have experienced major reductions in capital or those who tend to be very strategic in nature, there may be more focus on strategic restructuring. One such foundation that has sharpened its focus recently is the Walter and Duncan Gordon Foundation of Toronto whose board and staff took the time to re-think their future.

J/S: Although this blog is intended for funders, do you have any words of wisdom for those seeking support from Foundations?

HP: My advice to grantseekers and would-be foundation partners is always ’do your research’. While it is sometimes not easy to find out what a foundation’s goals and preferences are, it is worth trying to investigate to make sure that there is a good match.  It is painful both for a charity and for foundations to see the waste of effort resulting from a scattershot approach to grant applications. The best approach is one that has been well prepared and where there is some dialogue. Some foundations such as the McConnell Foundation of Montreal requests a one-page statement as a preliminary step, to try to avoid time and effort wasting on the part of charities who write a long application only to have it refused because it is not in the foundation’s priorities. It’s not easy but it’s necessary to do the research!

J/S: And finally, where and when can our readers find PFC’s report?

HP:  The full PFC survey reports are available to members only; however, I can make the executive summary available to anyone who requests it. Your readers can just drop me a note at hpearson@pfc.ca and I’ll send one off to them. We have many other resources also available freely on our web site. I would also like to extend an invitation to your readers to our upcoming conference “Pulse of Philanthropy” in Calgary on October 28 to 30, 2009.  It’s going to be an inspiring few days, and also a chance for PFC to celebrate it’s tenth anniversary.

J/S: Hilary, thanks from both of us for this insight into the workings of Canadian foundations during these challenging times.  We look forward to more updates and thoughtful analysis from you in the future.

Other resources:

Grantmakers for Effective Organizations (GEO) has some interesting reports on how US foundations are responding to the economic crisis.

This may be ’so 2008′, but if you are still wondering what the financial meltdown is all about, check out this clear and enlightening PBS documentary.