Be the Change
Eric Kessler’s Arabella Advisors helps philanthropists focus their giving for a new goals-oriented age.
Eric Kessler’s family built and operated one of the country’s most attractive places to work for five generations. He grew up alongside machinists and office workers at Fel-Pro, an auto-parts manufacturer outside of Chicago, which for decades offered its employees enormously generous benefits—college scholarships for workers’ kids, day care, several weeks of vacation per year—and generally created an atmosphere in which employees were happy to go the extra mile for their customers.
After the family sold the company in 1998 for a reported $750 million, then 26-year-old Kessler had the opportunity to join his family’s philanthropic organization, the Family Alliance Foundation. “What I immediately learned is philanthropy isn’t easy,” he says. “There are lots of challenges to engaging multiple generations in philanthropy.” The family-centric management style and progressive outlook on business ownership at Fel-Pro had helped prepare Kessler, but it still wasn’t easy for the family to balance all the competing points of view in its foundation.
In the years that followed, Kessler’s work expanded beyond the foundation. He advocated for the advancement of democratic institutions around the world as part of the National Democratic Institute, was selected to manage conservation issues as a White House appointee under the Clinton administration and pressed for environmental protections with the League of Conservation Voters.
“All through this I was watching the philanthropy world,” Kessler says. He saw the field begin to shift following Ted Turner’s bold launch of the United Nations Foundation in 1998. Philanthropy was evolving into much more than attending galas and writing checks. Then the Bill & Melinda Gates Foundation launched in 2000, manifesting a laser-like focus on well-defined goals. “I was blown away by the fact that it was all outcome oriented,” he says. Organizations like Charity Navigator, founded in 2001, were starting to think about bringing a more methodological approach to evaluating the efficacy of philanthropy.
Meanwhile, although Kessler was making personal contributions, he felt a lack of direction in his own giving. Many charities seemed to lack concrete objectives, and few foundations had meticulous research or compelling expertise to guide them. Kessler wanted philanthropies to “take a businesslike approach to their programs, ensuring that every dollar has the greatest impact possible, while also allowing for risk-taking and long-term investments.”
After more than a year of researching the direction philanthropy was heading and evaluating where he could have the most impact, Kessler founded Arabella Advisors in 2005. He identified two major needs that he could address through his venture: research and resources. After a client has spent time choosing philanthropic goals, Arabella provides research and guidance for achieving those objectives. It looks at the impact the philanthropy has had and what areas still need attention. It also provides support for foundations and philanthropists who have a goal but lack the staffing needed to realize the potential of their work. Today, with a staff of 160, several hundred clients and billions of dollars under advisement, Arabella is the largest philanthropy consulting company in the U.S.
Recently, Kessler has turned his attention to food and how it is produced and distributed. His latest project is food system advocacy, raising awareness about the importance of healthy, sustainable and affordable food. Kessler spoke with Worth about his new work in food, his approach to philanthropy and where he sees the most value in today’s goal-oriented giving.
Q: Give us the short version of the Eric Kessler story.
A: I grew up just outside of Chicago, in Highland Park, Ill. My family had a fifth-generation family-owned business in the auto industry, and for five generations it was thought of as one of the best places to work in America. It had amazing employee benefits. Before there ever was a thing called on-site day care, my grandparents had it. And before anybody thought about going above and beyond for their employees’ families, the company was paying college tuition for employees’ kids and hiring employees’ relatives. It was a very progressive manufacturing company that always had a philanthropic bent.
We sold that company in the late ’90s. But before then, and certainly after then, I had the great fortune of being part of a very philanthropic family that was active in the Chicago area in everything from women’s rights to voter participation to the religious community to the environment. I grew up around philanthropy. When we sold the business, I was given the opportunity to be a part of a family foundation.
“I had the great fortune of being part of a very philanthropic family that was active in everything from women’s rights to voter participation to the religious community to the environment.”
What did you learn from that opportunity?
Philanthropy isn’t easy. There are lots of challenges to engaging multiple generations of a family in its philanthropy because grandma’s interests are different than dad’s interests are different than the grandson’s interests. This is before the Gates Foundation; this is before the golden age of philanthropy and the Giving Pledge. No one was talking about grant-making strategy; nobody was talking about impact investing. It was easy to pick a list of 10 charities and write checks. It’s challenging to actually engage with those organizations and really understand the outcomes—to determine what it is that you as a foundation want to see change in the world and then build a strategy around that.
But that experience led to my founding what is now the largest philanthropy consulting company in the country. It gave me an awesome sense of opportunity but also of responsibility.
How did you come to found Arabella Advisors?
I worked in the nonprofit world for a while in the Clinton administration, helping the president and his secretary of the interior, Bruce Babbitt, manage environmental-conservation issues. And I spent seven years overseas on the front lines of the fight for democratic reforms. I was a country director and program manager for the National Democratic Institute, serving in the former Soviet Union, Southeast Asia and the Middle East, where I trained civic leaders such as youth organizations, women’s groups and political candidates who were pushing for freedom, equality and basic democratic rights. By 2003, 2004, lots of people are making money, the Gates Foundation is started, and you’re starting to see people writing about philanthropy critically. So I decided that I wanted to work in philanthropy professionally.
You studied the subject first?
I spent a year and a half studying the world of philanthropy and trying to understand where it was headed. I was in a business school program at Georgetown. My sense was that there was lots of money being made that would translate into philanthropic dollars, and that those philanthropists, the people earning money in technology and people inheriting it from others, would do philanthropy very differently from previous generations. I determined that I should start a consulting company that provided a broad range of services to help philanthropists have the greatest possible impact with their dollars.
What exactly does Arabella Advisors offer to clients?
First and foremost, we support family philanthropists, family foundations, by providing staffing. What that means is, there’s a whole bunch of foundations with assets between about $30 million and $300 million whose address is my office. We are their executive director, their program officer, their grant manager.
Second, we are philanthropy nerds. We provide strategy analysis for foundations of all types—big, professionally staffed foundations like the Rockefeller Foundation, small family foundations, corporate foundations. They will come to us and say, “We want to transform education in America. We want to eradicate this disease. We want to build great economic opportunity in our community.” And Arabella jumps in and does all the research and analysis. We write a plan, and often those foundations will hire us to manage that for them.
We also have an impact-investing arm where we’re sourcing for-profit investments that align with our clients’ interests. So for a client that cares about education reform, we’re finding investment opportunities in education technology companies. And we manage collaboratives among funders. So if five funders want to come together and jointly address sustainable energy in America and policies that affect that, we’ll manage a group of funders to work together and facilitate their work.
What made you think the time had come for an outcome-based approach to philanthropy?
There were two things that caused me to dive into this. One was Ted Turner’s transformative engagement with the United Nations. He saw the United Nations as a valuable institution that needed more flexible resources, so he decided to put in a billion dollars. He leveraged other donors to multiply that pledge by 10, to support and create the United Nations Foundation. And to me that was just, regardless of whether you like the United Nations or not, that was pretty neat.
The second piece was the launch of the Bill & Melinda Gates Foundation [the Gates are clients of Kessler’s]. Bill and Melinda planned to work on three things: education in America, global health and development and their community in the Pacific Northwest. I could give you lists and lists of foundations with a million dollars that do 10 things. They said, “Here’s the change that we want to see.”
So in 2005 I started Arabella, and I’m just getting going when the recession hits. I thought for sure I’m done. And actually, the opposite happened. What happened as a result of the recession was the clients who we were working with at the time didn’t pull back. They actually dove in. They said, “America needs us most now.”
In a nutshell, what’s your philosophy about philanthropy?
First and foremost, it’s about the thing that you want to get done. We always push people to start there. Because if you really focus on things that you want to get done, you’re going to be a better philanthropist. You’re going to be more passionate. You’re going to track all of your philanthropy against a goal.
But it’s not just about the money. Our clients are some of the most successful people in the world. Their money is incredibly valuable, but so is their experience, so is their voice. So when Bill Gates stands up at Davos and talks about the worth of a life, that all lives are worth the same, that is an incredible value. When he says, “I’m putting X dollars into this issue,” it doesn’t matter what the dollar amount is. The fact that he’s doing it is going to leverage a ton more money.
Where does food fit into this for you?
I knew nothing about food until six or seven years ago when some foundations that work on these issues engaged us in some research projects. And what I love about food and food system change—how food is produced, distributed, consumed—is that food should be a nonpartisan issue that really lays on top of workers’ rights, immigration issues, health and nutrition, women’s health, climate change. All these other issues that I care about, food really encompasses all of them.
“I knew nothing about food until six or seven years ago, when some foundations that work on these issues engaged us in some research projects.”
What’s your role at Arabella, where you’re principal and managing partner, now?
Recently, I decided I wanted to focus on food system change and working with philanthropists who share that passion. So two years ago I hired an incredible CEO, Sampriti Ganguli, to run the company, and I devoted myself to working on food issues.
What are you doing specifically?
I am advising foundations, philanthropists and investors who are eager to see our broken food system, now driven by producing the cheapest possible calories, transform into a system that delivers nutritious, sustainably grown, equitably produced, delicious food. Together we are looking for investment opportunities in businesses whose products and services support this “good food” system, such as Rebound Technologies, whose refrigeration technology will reduce food waste on the farm, and Brandless, which is delivering low-cost, small packaging, better-for-you food in innovative ways. I am also helping these same clients reform bad government policies that stand in the way of good food.
What gives you the most satisfaction in your work?
When a philanthropist says, “We’re having the impact that we want to have. I get it now. I get why you said slow down. I get why we did this research before we set our plans.” That gets me out of bed every day.
—With Rose Arce and Samuel Steinberger
Doing it Right
Eric Kessler highlights philanthropists (all clients) he considers to be among the most effective working today.
Bill and Melinda Gates
Founders, the Bill & Melinda Gates Foundation
“The Bill & Melinda Gates Foundation saves lives every day. What I admire most about them is their incredible focus. With their vast resources, they might be tempted to spread it thin and work on all of the problems of the world. The Gates Foundation remains steadfastly focused on improving lives in the developing world and improving education and access to healthcare here at home.” gatesfoundation.org
Founder, Forsythia Foundation
“Alison Carlson’s concern about toxic chemicals in our everyday lives was a harbinger of the current consumer demand for all-natural, organic everything. She combines her charitable giving and her investment dollars to have an outsized impact on these issues. Her Forsythia Foundation supports groups that advocate for reducing the amount of toxic chemicals the government allows in products we buy. And Safer Made [one of Forsythia’s venture funds] invests in a new generation of products, including skin care, food packaging and other innovations that are designed without harmful chemicals.” forsythiafdn.org, safermade.net
Manager, Satter Foundation
“Muneer Satter, a retired partner at Goldman Sachs who now manages a medical device investment fund as well as his family office, is a philanthropist who believes in results-focused grant making and doesn’t mind taking a risk here and there to maximize his impact. Through his family foundation, he and his wife, Kristen Hertel, invest in strong leaders tackling challenges like human rights abuses, poverty, educational disparities, disease and environmental issues. For example, Muneer established a first-of-its-kind fellowship for Harvard Law School students and recent graduates that responds to mass atrocities and human rights abuses around the world, while also creating a pipeline of human rights lawyers.” satterfoundation.com