The Way for Foundations to Have More Impact? Fund Networks!

January 2010

At Network Impact, we’ve been arguing for this for several years. A fascinating new report from the Monitor Institute picks up the theme.

The Monitor Institute’s recent (and excellent) report, “What’s Next for Philanthropy,” describes the changing strategic landscape in which foundations make their investment decisions–and urges philanthropists to adopt a new set of practices for increasing their impact that includes “activating networks.” Monitor’s reasoning: “Advances in network theory and practice now allow funders to be more deliberate about supporting connectivity, coordinating networks, and thinking about how the collective impact of all of their efforts can produce change far beyond the success of any single grant, grantee, or donor.”

Yes, indeed! Madeleine Taylor and I made this point in our first report on networks, ”Network Power for Philanthropy and Nonprofits,” in 2004. With financial and intellectual support from the Barr Foundation in Boston, we identified numerous examples of social innovators using network approaches to generate impact, dissected the theories of networks, framed the practices of network building, and suggested ways that the social-change sector could accelerate and spread the use of networks to increase social impact. More recently, as we’ve seen foundations become more interested in network building, we wrote a short paper on what foundations should worry about and expect when they start investing in social change networks.

Monitor’s report offers a compelling, spot-on paradigm shift for foundations:
Simply stated, philanthropists operate today in a stressful, rapidly evolving, networked, and interdependent world.

“Many of philanthropy’s core practices and principles remain essentially unchanged from the way they were a hundred years ago, when Andrew Carnegie and John D. Rockefeller first created the foundation form. As we and other observers have been noting for some time, the world around philanthropy is changing much, much faster than philanthropy itself…
…Where the cutting edge of philanthropic innovation over the last decade was mostly about improving organizational effectiveness, efficiency, and responsiveness, we believe that the work of the next 10 years will have to build on those efforts to include an additional focus on coordination and adaptation. Coordination, because given the scale and social complexity of the challenges they face, funders will increasingly look to other actors, both in philanthropy and across sectors, to activate sufficient resources to make sustainable progress on issues of shared concern. No private funder alone, not even Bill Gates, has the resources and reach required to move the needle on our most pressing and intractable problems. And adaptation, because given the pace of change today, funders will need to get smarter more quickly, incorporating the best available data and knowledge about what is working and regularly adjusting what they do to add value amidst the dynamic circumstances we all face.”

Monitor’s summary of why networks matter in this changing world focuses on the need for greater coordination and leveraging of resources to achieve systemic impact–and what a big change in practice this is for foundations: Although the individual grant is the typical unit of analysis for most foundations, the success of any grant or organization is rarely sufficient to move the needle on a complex problem. We have all felt the irony when successful programs are lauded while the system they aspire to change continues to fail. Funders are well positioned to support connectivity and to coordinate and knit together the pieces of a network of activity that can have impacts far beyond the success of any one grant, grantee, or donor. And advances in network theory and practice now allow funders to be much more deliberate about supporting and participating in networks and in thinking about how the collective impact of a coordinated portfolio of grants can produce more significant change. These very advances in network practice–the art of building, growing, and maintaining various types of networks–are the focus of our consulting, tool-building, and research work at Network Impact.