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| Feature | ||||||||
| Perpetual Motion
Elizabeth Harris 02/01/2007 |
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Eddie Phillips, a Minnesota philanthropist and head of his family’s beverage company, took a call from Jane Aronson, a pediatrician who wanted to improve health care for orphans in developing countries. She never asked him for his money. Instead, she wanted advice on how to establish a charity and run it like a business. Phillips was in California and Aronson in New York, and he said she would have to wait until he returned from a board meeting in Santa Monica. Instead of waiting, she booked a cross-country flight and cornered him during a three-hour break in his meeting. She told him that she had noticed certain recurring problems among children adopted from countries such as Russia and Bangladesh: listlessness, small craniums, underdeveloped physiques. She wanted to set up health care facilities abroad to treat the problems at the source. "It was instant rapport," Phillips recalls. Aronson said that she hoped he would eventually find her "worthy enough for collaboration," but he was impressed with her determination from the start. "I’m her unconditional supporter, and have never said no to her," he says.
Phillips oversees his family’s two philanthropies, the Jay and Rose Phillips Family Foundation and the Edward and Leslye Phillips Foundation, and has given millions to the Mayo Clinic and the Multiple Myeloma Research Consortium. But Aronson asks him for money only occasionally, relying more heavily on his counsel; his financial contributions have totaled hundreds of thousands of dollars, rather than millions. He recently gave $250,000 over two years to build new schools in Ethiopia for children with HIV/AIDS. Aronson originally planned to construct one children’s center there, but Phillips challenged her, questioning whether she might serve more orphans if she built four or five smaller centers. Phillips hopes to volunteer at the center in Addis Ababa with his wife and children in March. Instead of writing huge checks, Phillips, Aronson and Aronson’s partner, Diana Leo, focus on networking and fundraising. Angelina Jolie appeared as a special guest at the foundation’s first gala in 2005 and has given $250,000 to the cause. USAID and the Bristol-Myers Squibb Foundation have provided similar grants. Perhaps more important than money, Phillips also offers a guiding hand and, if necessary, a tight rein on the organization’s direction.
Indeed, the Worldwide Orphans Foundation depended almost entirely on Aronson’s energy and personal relationships. Shortly thereafter, she and Phillips began discussing how this posed risks to the organization. She was running more programs than ever, but did not have an active board, a support staff or a long-term fundraising plan. A patron who has become the primary benefactor of a particular cause is apt to panic when realizing that personal or family wealth and the work of a few handpicked staff members are the only fuel keeping the charity’s engine running. Philanthropists caught in this dilemma must take a strategic view toward reorganizing their charity so it can sustain itself should the donor’s financial fortunes change or a favorite nonprofit executive retires.Worldwide Orphans, with a current annual budget of roughly $1 million, is small by many nonprofit standards, but Phillips and Aronson have ambitions to expand it so that it can become more self-sustaining and, ultimately, provide more assistance to more orphans. A sustainable philanthropy is one that is best described as a charity designed to last as long as it is needed, and sheer size represents an important component of sustainability. The Bill & Melinda Gates Foundation may be the most extreme example of this notion. It will last as long as it is in capable hands by virtue of Warren Buffett’s plan to give an estimated $31 billion to augment the foundation’s $29 billion endowment. A philanthropist seeking international scope and sustainability on a smaller scale should, at the outset, set up an organization with a clear succession plan. A decade after the founding of Worldwide Orphans, Aronson is addressing this issue. In 2005, Aronson sought guidance from a consulting firm to assess the nonprofit’s structure, and, on the consultant’s advice, reorganized the staff and board. She is the executive medical director. She makes all decisions related to what services to provide and where, but the bulk of the day-to-day planning and execution falls to a chief programming officer and a new executive director. If anything were to happen that put Aronson out of commission, the executive director and board of directors would assume her tasks.
These types of collaborative arrangements, in fact, can prove as important as fundraising in terms of ensuring a charity’s sustainability. David La Piana, a nonprofit consultant based near San Francisco, reached this verdict in a Ford Foundation-funded study, Real Collaboration: A Guide for Grantmakers, published in 2001. Examining grant-makers who wanted to be more collaborative with their grantees, La Piana wrote: "A large-scale initiative, an effort at ‘systems change,’ or any other complex social undertaking, usually requires coordination of efforts among multiple parties." Charles Raymond, managing director of Citigroup’s Global Wealth Management practice, has served as president of the Citigroup Foundation, commissioner of the New York City Department of Homeless Services and managing director of the New York City Ballet. He grappled recently with the idea of multiple-party coordination with a client focused on helping a village in Africa. The Spanish woman had vacationed in Tanzania and was so moved by the plight of starving individuals in a village there that she proceeded to fund the construction of several buildings, including a mosque, church and a hospital, to which she flew in Spanish doctors to provide treatment. Raymond looked at all she had done, and informed her that her tremendous generosity was endangering the community. "She sort of just stared at me," Raymond recalls. "She was successful and was having a great run." But she had unwittingly created a situation in which the town became completely dependent on her largesse. Raymond says the donor needed partners in order to create a sustainable legacy. He began introducing new options to her last fall. Since then, she has considered launching a collaborative effort with a medical school in Tanzania to create a residency program rather than flying in doctors from Spain. She and Raymond will also begin talking with other interested donors about developing more joint efforts and will begin creating a long-term plan this year, he says. Bobby Shriver recently helped launch one of the most popular and visible philanthropic collaborations in recent years. Shriver, a scion of the Kennedy-Shriver clan, is chairman of DATA (Debt AIDS Trade Africa), which he cofounded in 2002 with rock star Bono to fight AIDS. But rather than funding these causes himself, Shriver worked with Bono to create a retail campaign to not only raise awareness of his pet issues, but to also raise money for the Global Fund, which seeks to combat AIDS in Africa.Dubbed (RED), the project has some of the world’s largest retailers creating specialty products, with celebrities such as Steven Spielberg and Penelope Cruz serving as models. In the program’s first five months in 2006, sales of (RED) products generated $10 million for the Global Fund, five times the revenue raised by the nonprofit in five years, Shriver says. Today, the Global Fund claims to provide 50 percent of worldwide donor funding for malaria, two-thirds for tuberculosis and roughly 25 percent of all philanthropic money to fight HIV/AIDS in the developed world. Shriver is one of the pioneers of using entertainment vehicles to sustain philanthropic goals. Starting in 1987, Shriver produced seven albums called A Very Special Christmas, coaxing Bono, Jon Bon Jovi and other musicians to record carols, and retailers to donate a portion of their profits to the Special Olympics, which itself was the brainchild of his mother, Eunice Kennedy Shriver. In addition to his work with (RED), he also serves as Santa Monica’s mayor pro tem, a position he was elected to in 2004. Shriver and Bono have negotiated arrangements with the likes of Gap, Motorola and Giorgio Armani, and are constantly looking for other interested parties. "The Paul Newman project has been doing this for 25 years. I chose the for-profit form for this because I wanted it to have the for-profit energy," Shriver says.
The challenge of maintaining the marketability of a campaign such as his with mercurial consumers seems more pressing than answering detractors. Shriver acknowledges that the success of (RED) over the long term will depend on whether or not his corporate partners can and will continue to create products that sell. Newman’s Own food products are items that consumers replenish every few weeks and continue to buy as long as they like the taste. But T-shirts and mobile phones with a charitable message are decidedly faddish. "The thing we’re doing is a very, very difficult thing to do, and may still fail," he concedes. "It’s a risky thing; we could go right on our butts here." Shriver has created five-year partnerships with each company, but will offer no guarantees as to what might happen when these contracts expire. Adlai Wertman, a former investment banker with Prudential who is now CEO of Chrysalis, a job-training program based in Los Angeles, contends that the idea of a nonprofit counting on retail sales presents an inherent stumbling block on the path to sustainability. His charity has never operated such a venture. "A nonprofit needs consistency," he says. "If you need $3 million a year to run a nonprofit, you need the money this year. A retailer might give you $4 million this year and $1 million next year." The fluctuating nature of retail sales, he adds, would make it a difficult source of funding for a charity. The Global Fund, however, makes grants rather than provide charity services, so Shriver could potentially find other sources of revenue, if (RED) income begins to lag, without disrupting the programs he funds. John Whitehead, a former cochairman of Goldman Sachs who is now chairman of the firm’s foundation and in his sixth decade as a director of the International Rescue Committee (IRC), devised a tough-love strategy for making certain that the organization never runs out of the capital it needs to operate. Whitehead and the Mellon Foundation gave IRC $10 million in 2002 in the form of the John Whitehead Emergency Fund. The fund pays for emergency responses to global crises, with the stipulation that the charity pays back what it spends from the fund with contributions from other donors. The fund allowed IRC to send aid to Darfur in 2003 and to Pakistani earthquake victims in 2005 without having to wait for a foundation’s board meeting or governmental assent. "The IRC was a beloved organization, but not always financially on solid ground," says Janet Harris, the committee’s vice president of development. "John saw the organization extend itself without having the financial foundation underneath it. His funding will be used over and over and over again. And it will leverage much bigger donors."So far the plan to use it to leverage, or at least inspire, bigger donors seems to be working. IRC used some of Whitehead’s gift as seed capital to start the Freedom Fund, of which the John Whitehead Emergency Fund is now a part, as an ongoing campaign for endowments and emergency funding. Maurice "Hank" Greenberg, former chairman of AIG, was inspired by Whitehead’s generosity. In 2006, his Starr Foundation gave a $7 million grant to the Freedom Fund, which has amassed approximately $80 million. Paul Newman has also given money to the fund. "One of the chief motivators for people to give to the fund is
they know the IRC responds so quickly—within 72 hours—to a humanitarian
emergency. What if they’re on vacation, what if their family foundation doesn’t
have a meeting for 30 days?" Harris says. "We borrow from the fund, and we
report back to them that the funds are repaid again. So they know their money is
sustainable, that it is being used over and over again, but that the corpus of
the fund remains essentially full within each year." Elizabeth Harris is a staff writer for Worth. Additional Information False Profits |