The United States boasts approximately 86,000 foundations (grantmakers) and 1.5 million nonprofits (grant recipients). Given the classic principle of supply and demand, there’s an obvious power dynamic that favors foundations.

However, what if – all other things being equal – the numbers switched? What if there were only 86,000 nonprofits and 1.5 million foundations? If that were the case, I can think of at least seven major changes:

(1)    Nonprofits would send requests-for-proposals (RFPs) to foundations.

We would operate in a grant-seekers market. Consequently, nonprofit executive directors and development directors would design requests for proposals for foundations. Nonprofits would not have the capacity to use the massive funding available, so development directors would have to be selective and reject most foundation proposals to give money. Maybe, thoughtful nonprofit development directors would send rejection letters that would explain how the foundation could be more successful next time.

(2)    Nonprofits would conduct site visits of foundation offices.

If nonprofits sent out RFPs, it’s likely that nonprofit development directors also would conduct site visits of funder offices, maybe inviting their organization’s board members to join. Development directors might question the size, location or quality of some foundation offices. To select the best foundations possible, nonprofits would want to rigorously evaluate foundations’ budgets. Nonprofits might look more favorably on foundations that could demonstrate that their annual qualifying payout of five percent or more includes only a very small percentage of overhead costs (i.e. foundation salaries and rent), with a much larger percentage going to grants. This percentage breakdown would demonstrate a foundation’s support of the idea that foundation dollars are partially public dollars. Development directors might also inquire what percentage of a foundation’s board and staff represent the populations (i.e. the homeless, immigrants, etc.) that the foundation wants to serve and empower. It’s likely that development directors would be highly skilled in evaluation and measurement of foundation outcomes.

(3)    Nonprofits would attend “nonprofit-only” events.

Nonprofit development directors would have to send a myriad of declination letters, and would likely feel terrible saying “no” so often. Therefore, development directors and other nonprofit staffers might pursue safe spaces (nonprofit-only conferences that don’t allow foundations leaders), where they could speak freely and not be solicited by foundation program officers.

(4)    Nonprofit development directors would be “dream jobs.”

Nonprofit development directors would be the most competitive positions in the sector. Some of the largest nonprofit organizations, such as The Red Cross and The Boys and Girls Club, might have term limits on their development director jobs; this would allow nonprofits to gain fresh perspectives from people in the field and prevent people from staying in the development director positions for too long.

(5)    Funders would primarily give multi-year and general operating support.

According to the IRS, most foundations must grant at least five percent of their endowments each year, based on multi-year averages. Because of how competitive it would be to get a nonprofit to accept a grant, it would be in a foundation’s best interest to only give multi-year and general operating support, which would make nonprofits more likely to accept their money.

(6)    Funders would prioritize mission investing.

The vast majority of foundations would designate of their endowment to mission investing, as a nonprofit might reject a foundation’s funding if that foundation invested in companies that contradict its mission. For instance, if a foundation funded the protection of the environment, but invested in ExxonMobil, that foundation’s grantees would be disappointed when evaluating the foundation. Moreover, nonprofits might require foundations to both divest from companies that undermine their missions, as well as invest in companies that promote them (such a wind power companies, in this example). A program officer might also assess historic data about a potential foundation donor, look at how it gained its wealth in the first place, and determine if that history is consistent with the nonprofit’s mission.

(7)    Funders would bring up power dynamics.

In this scenario, perhaps funders would be the ones bring up the power imbalance between nonprofits and foundations.

This piece is meant to be a thought exercise, and it is sprinkled with levity. It’s not a gauntlet thrown for a sector-wide coup d’état. Rather, satirically flipping our assumptions about the philanthropic sector allows us to see the current power dynamics at play. Given the supply and demand in our sector, how can foundations better address power dynamics, empathize and truly walk in the shoes of their grantees? After all, we are all on the same team, and it is a great team.

Christine Reeves is senior field associate at the National Committee for Responsive Philanthropy (NCRP). Follow @NCRP on Twitter.

Founded by the former president of Coca-Cola, the Robert W. Woodruff Foundation is as much of an Atlanta institution as the company Woodruff helmed for over 30 years. The foundation’s largest grants fund institutions such as Emory University, the Robert W. Woodruff Arts Center and the Joseph W. Jones Ecological Research Center at Ichauway, demonstrating its dedication to education, culture and conservation. Yet, with 82 percent of its assets ($2.3 billion of $2.8 billion) invested in the Coca-Cola Company, the Woodruff Foundation maintains a risky investment strategy, which compromises its ability to accomplish its mission.

NCRP’s recent Philamplify assessment of the Robert W. Woodruff Foundation recommended that the Woodruff Foundation diversify its holdings to allow for more flexible and strategic grantmaking. Author Elizabeth Myrick explains:

“In spite of the fact that Coca-Cola is the source of the foundation’s wealth and has performed well over time, such a risky investment strategy limits the ability of the foundation to make certain kinds of grants. The volatility of a highly concentrated portfolio makes providing multi-year and general operating support more challenging.”

Here are three reasons why the Woodruff Foundation, and other foundations, should diversify their stock portfolios:

1. One-stock investment ties fortunes to a single company, which may experience hard times.

While the Coca-Cola Company dominates the beverage industry and has consistently ranked as one of the world’s most valuable brands, it is not immune to fluctuations in the market. For instance, Coca-Cola stock declined considerably in the early 2000s, which led Emory University, similarly endowed with Coca-Cola money, to divest from the company.

2. Reliance on one source of income can make a foundation more cautious in its grantmaking.

Woodruff tends to prioritize large, long-established organizations and shies away from newer and smaller nonprofits. The foundation also generally refrains from providing multi-year grants and general operating support.

3. Monolithic investment may prevent a foundation from engaging in mission-related investing or result in a foundation being primarily invested in a company whose practices are at odds with its mission.

For example, the Woodruff Foundation supports environmental and health causes. However, Coca-Cola has been critiqued for negative environmental impact of its manufacturing practices, especially in India and Latin America, and health effects of its products.

There are a number of notable organizations that have completed the process of divesting from one primary source of stock revenue, and they have all come out the stronger for it. Examples from the philanthropic sector include the William and Flora Hewlett Foundation, which moved to diversify its holdings and sell Hewlett-Packard shares after 2001. In addition, the W.K. Kellogg Foundation successfully reduced ownership of Kellogg Company stock beginning in 2005.

The Lilly Endowment is one of the more outstanding cases of diversification. Founded in 1937 through gifts of stock in Eli Lilly and Company, a top ten pharmaceutical company, the foundation bestows more than $270 million in grants each year, drawing from a $7.7 billion endowment. In 2006, the Endowment adopted an asset diversification plan to sell $2 billion of its Eli Lilly stock. In April 2014, the Lilly Endowment resumed selloff, which had been suspended since the 2008 financial crisis.

While Woodruff will surely maintain its relationship with Coca-Cola, should the fate of Atlanta and the Woodruff Foundation’s grantees be so closely tied to the Coca-Cola Company? Make sure to visit Philamplify, where you can comment and vote on NCRP’s recommendations for the Woodruff Foundation!

Special thanks to Kevin Laskowski, NCRP senior research and policy associate, for his assistance with this post.

Caitlin Duffy is the project assistant for Philamplify at the National Committee for Responsive Philanthropy (NCRP). Follow NCRP on Twitter (@ncrp) and join the #Philamplify conversation.

As we all return to work after the winter holidays and celebrating the advent of a new year, many of us have likely made resolutions that we think will help us improve our lives.

Resolutions are important to us personally and they are also important for the nonprofit sector. As we start our myriad endeavors for 2014, now is the time for philanthropy to consider making some resolutions that will bolster our sector and empower grantees in implementing the important work they do to improve the lives of those with the least wealth, opportunity and power.

In Smashing Silos in Philanthropy: Multi-Issue Advocacy and Organizing for Real Results, we showed how truly strategic grantmakers look to the entire ecosystem of interactions that best supports the nonprofit sector and raises the probability of realizing the impact that they wish to see in the world. One of the most viable ways to do this is by investing in multi-issue advocacy and organizing that fosters social capital.

So here are seven things that foundations can do in 2014 to effectively support cross-issue efforts that can help maximize impact in the coming year and beyond:

1.    Begin with your values and work from there. This is more frequently practiced by social justice funders with a focus on underserved communities, but it is not only social justice funders that provide grants for multi-issue advocacy and organizing. Social change needs specific leadership skills, focus and accountability. Clarifying the issues and constituencies you care about is a good starting point to begin considering supporting cross-issue efforts can complement your current strategies to increase the chances of “winning” in your focal area.

2.    Diversify your portfolio. Diversification is the foundation of any investment strategy. Philanthropies are fortunate in that they have significant freedom to test out new strategies and tactics and engage with a range of actors in our sector including advocates, organizers and infrastructure groups.

3.    Nurture the grassroots. If a grantmaker hopes to contribute to effecting sustainable change to the complex problems our communities confront, it is imperative to ensure that the base, those closest to the communities we care about, are well taken care of. Professionalized advocacy is important to this process but social movements must be guided by those who stand to gain or lose the most. This does not imply abandoning social service provision; often, service organizations have the ability to organize and mobilize the constituents they serve.

4.    Provide unencumbered, flexible and long-term support. Providing grantees with substantial core support and multi-year funds of more than two years is essential to their fiscal stability and their ability to respond to opportunities that arise unexpectedly. Knowing that funders are invested in their work for the long-term allows grantees to engage in advocacy and organizing, two of the most impactful means to achieving shared goals with their donors. Additionally, grantmakers can experiment with providing core support grants in addition to program grants to facilitate relational power among organizations, leaders and constituents.

5.    Add grants for cross-issue work to your portfolio and continue providing funds to your preferred issue simultaneously. Similar to the suggestion of adding multi-year operating support to existing program grants, grantmakers can continue funding within their issue while testing the waters of engaging in multi-issue organizing.

6.    Model the collaboration that you fund and hope to see. Building relationships among peers, i.e., other grantmakers offers real potential for being able to reconsider strategy and break through issue silos. This can be done through regional meetings, systemically combined conferences and convenings and building coaching circles. Learning from successes and failures in such environments offers program staff at a foundation to identify the needed tools to demonstrate to their trustees the value of engaging in multi-issue work.

7.    Engage with your grantees as true partners. Our research and interviews for Smashing Silos in Philanthropy found unanimous agreement that the relationship between funders and grantees involved in multi-issue work is fundamentally different than in other work. Grantees engage in an iterative process to craft strategy along with their funders because they are more often than not much more attuned to the most pressing issues our communities face. As some have contended, strategic philanthropists must learn to cede some control and trust their grantees while not abandoning mutual accountability. Trusting grantees and involving them in strategy development and decision making are among the fundamental building blocks of a relationship that mirrors a partnership.

Will you make a resolution to engage in multi-issue advocacy and organizing in some way suggested above? We know that institutional change is difficult, but you can start by committing to experiment with at least one or two of the recommendations that will help achieve your mission and move the needle on issues you care about.

Niki Jagpal is director of research and policy at the National Committee for Responsive Philanthropy (NCRP). She frequently blogs about philanthropy, race, class and social justice.

Image by freedigitalphotos.net/StuartMiles.