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The 1996 horror movie Scream has long been famous for its twist: As the protagonist prepares diligently to defend against threats from the outside, it turns out the killer is already inside the house.
Philanthropy, too, is used to dealing with significant challenges in the external world. In the midst of tremendous uncertainty, funders are trying to adapt how they work in real time. They’re exploring how to collaborate more effectively, operate more nimbly, partner across sectors, shift power dynamics with grantees, and much more.
But far too often, funders are implementing these new approaches within structures and systems that were built for more traditional ways of working. This mismatch—between a funder’s external strategies and its internal organizational design—has the power to fundamentally derail even the best-planned and most promising new strategies.
When it comes to foundation transformation efforts, just as in Scream, the killer is often inside the house.
A number of funders have begun to look much more intentionally at their organizational design—the interconnected set of choices across a funder’s structure, processes, governance, and talent model that help it organize its work. And they’re making advances that allow them to better align their organizational design to the impact they hope to create in the world.
Our team at the Monitor Institute by Deloitte spoke with more than 40 philanthropic leaders and organizational design experts across the country to understand some of these emerging models and approaches. We’ve captured the richness of these examples and lessons from philanthropic leaders in our new report, What’s Inside the House: Is Org Design Derailing Your Foundation’s Strategy? Below, we preview a few of these stories and learnings.
Bridge, Adapt, Deliver
We found that—given the dynamism and interconnectedness of the problems funders are now trying to address—many traditional “default” organizational design settings can’t keep up any longer. Instead, funders are experimenting with new operating models that are helping funders organize and operate in ways that allow them to bridge across different perspectives, adapt to changing circumstances, and deliver more quickly and effectively.
First, funders are working to bridge—building stronger connections internally across the organization and externally with grantees, communities, and potential partners. Take, for example, the W.K. Kellogg Foundation (WKKF). After eight decades of helping children and families succeed, the foundation’s organizational design had become too siloed, with disconnected teams pursuing distinct goals.
To break down these silos, WKKF started by creating a shared purpose across its teams. The foundation’s board and leadership team, with significant input from communities and staff, created a shared set of goals and tactics that every team at the foundation is striving toward (for example, “increasing the number of high-quality early-childhood-education seats available for children”). This means all of the foundation’s teams, from their local work in Detroit, to their national systems-change efforts, to their measurement, evaluation, and learning approaches, are aligned to the same set of goals.
WKKF also undertook a significant restructuring to better bring its people together. As part of a new “networked” organizational structure, the foundation created teams composed of programmatic and operations staff—such as grantmakers, grantmaking administration, and finance—ensuring that each team has the resources, expertise, and authority to work effectively end-to-end. Keen to ensure these new teams didn’t simply become new silos, the foundation designed new forums for collaboration where people come together across units to share ideas and learning.
Without strong bridges, ideas, information, and action can become isolated and subscale. And in a rapidly shifting environment, accessing the full flow of creativity across an organization’s full team and partners is critical to stay informed, plan, and act in coordinated ways.
Second, funders are trying to adapt—designing for greater flexibility to better respond to changing external dynamics. The James Irvine Foundation (Irvine), for example, created a set of new structures and processes that allowed it to be more versatile. “We’ve learned you can’t be too rigid. You’ve got to have enough nimbleness to sway a little,” explains Charles Fields, Irvine’s Executive Vice President of Programs.
As part of this shift, the foundation moved away from traditional programs that were organized around distinct issue areas and had relatively fixed budgets year in and year out. Instead, the foundation now organizes its work through “initiatives,” which are time-bound efforts over seven to 12 years with clear goals, a multi-year budget aligned to those goals, and a dedicated, cross-functional team to execute on the work. At the endpoint of an initiative, Irvine can wind it down or, more typically, incorporate learnings and adapt the work as a new initiative with updated goals, timelines, and budgets.
In addition to initiatives, the foundation created a new program development function with an explicit mandate to explore, experiment, and adapt. The foundation also developed new budgeting and forecasting processes, working to ensure that each initiative is fully funded and that there is an “unallocated” budget each year allowing Irvine to respond to unplanned crises or opportunities.
While all of these changes worked together to help Irvine become more nimble, it’s important to note that not all of the foundation’s work is adaptable. The foundation developed its “north star”—a California where all low-income workers have the power to advance economically—and a commitment to racial equity that provide longer-term stability and direction to the foundation’s work.
For funders looking to adapt better in an uncertain social impact landscape, it’s important to build feedback loops, systems, and processes that facilitate more rapid learning and adjustment. But it’s also critical for funders to find balance—clarifying key points of consistency that can serve as anchors as they try to operate with greater nimbleness and flexibility.
Finally, funders are seeking ways to better deliver—executing work and creating impact in faster, more efficient, and effective ways. As the Marguerite Casey Foundation (MCF) approached 20 years of operation, for instance, it recognized that its resources were spread too thinly across a large number of grantees focused on a range of issues and strategies. The foundation decided to concentrate its portfolio on local organizations doing direct community organizing and to focus its role on distributing funds to these organizations as seamlessly as possible. “It's our job to get the people who best align with our mission the most money possible with the least amount of friction,” summarizes MCF President and CEO Carmen Rojas.
To reduce that friction, the foundation changed its grantmaking processes, structures, and talent model. The foundation now provides five years of significant, general operating support to a smaller number of grantees and simplified its grantmaking processes to reduce burden on those grantees. With less “churn” compared to other funders in terms of finding new grantees and processing short-term, one-year grant agreements, the foundation shifted its talent model to better support a smaller, more stable set of grantees. As a result, MCF has just three program staff and 17 operations staff. Their role is to streamline grantmaking, to help as needed (including connecting grantees to other funders), and to otherwise stay out of the way in an effort to make the foundation the most efficient steward of funds possible.
As nonprofits deal with significant disruption and uncertainty, funders can adjust their own organizational rules, structures, and processes to reduce friction as much as possible.
Lessons From Funders
Funders are recognizing that outdated and unquestioned organizational design choices can limit real-world impact and hamper efforts to respond and adapt to uncertainty. Fortunately, some funders are implementing solutions that can provide important learning and inspiration for others.
Our research surfaced a number of important lessons from foundations that are deliberately shifting their organizational design to fit new ways of working.
- Common challenges, common solutions: While no two funders are exactly alike, it does appear that many funders are wrestling with a similar set of organizational challenges. Funders report siloed internal functions, or even fiefdoms, that don’t collaborate effectively; rigid internal strategies and structures that create bureaucratic logjams and don’t allow for enough flexibility; and inefficient systems, technology, and grantmaking processes that cause unnecessary friction and delays. Once funders recognize these challenges in their own organizations, there are a growing range of design options that can help them bridge internal (and external) divisions, adapt to a changing and uncertain future, and deliver more efficiently and effectively.
- It’s all about alignment: Organizational design is not one thing, but rather a set of interconnected choices about structure, process, governance, and talent models. When these choices are aligned with a funder’s strategy, and with each other, they mutually reinforce one another and create a cohesive whole. Much like having a single vertebra out of alignment in the spine can cause pain in the whole body, having a single organizational component out of alignment can cause confusion, frustration, or inefficiency in the organization.
- Change is hard, but worth it: One key reason why mismatches between strategy and organization design are so common is because transforming an organization is so difficult. As one foundation executive shared, “It’s not for the faint of heart. Because the knives will come out.” Leaders can be fiercely protective about their work, their teams, and their individual power. But there are ways to ease the transition and mitigate risks. And leaders on the other side of large transformations shared how having aligned strategies and organizational design allowed them to work in powerful new ways.
Lessons like these suggest that organizational design doesn’t necessarily have to be the killer inside the philanthropic house. Instead, it can unlock greater cohesion, connection, and confidence that allows funders to truly maximize their strategies and impact over time.
Read more stories by Justin Marcoux, Jasmine Arai, Kaitlin Terry Canver & Gabriel Kasper.