As the preceding profiles indicate, foundations can have an impact when they choose to increase their payout rate or limit their lifespan. While some of these profiled efforts are still in their early stages, the fact that these donors have looked at philanthropy through a new lens opens intriguing vistas.

From the urgency and focus conferred by a spend down schedule, to the need to find a more flexible way to relate a foundation's administrative and grants expenditures to investment policy, to the adoption of entirely new structures for philanthropy, the experience of these foundations offers important lessons for the whole field.

Some of the lessons include:

• The process of adjusting a foundation's payout rate to something other than 5% or its lifespan to something other than perpetuity re-affirms some of the basic principles of effective grantmaking, such as mission clarity, focus and impact.
• The rigorous conversation that such an adjustment requires - clarifying mission and goals, identifying strategies, and determining the allocation of resources over time - is inherently valuable, contributing to intentionality that will serve the foundation well, whatever the course it decides to follow with regard to payout and lifespan.
• Linking payout or lifespan to mission can offer a foundation unique opportunities to be deeply involved in areas it cares about, to be responsive to changing circumstances, and/or to make large investments that can prove to be strategic tipping points in its fields of endeavor.
• Choosing spend down prompts foundations to consider the consequences of their exit from the field, and can result in such valuable activities as work on capacity-building of its grantees.
• Today, more and more donors and foundations are considering structures and strategies that go beyond the assumptions of 5% payout and perpetuity, enriching the field as a whole.
• Making the decision to pay out more than 5%, spend down, and/or adopt new models for giving has required these and other foundations and donors to address numerous practical considerations, such as staffing, investment, grantmaking procedures, exit strategies, evaluation and legacy. As is the case with the larger questions of strategy and direction, the choices made about these issues have also been tied to mission, and tailored to the accomplishment of that mission.

Experimentation with payout, spend down and methods is likely to continue. A 2004 Foundation Center survey reported that of the 879 private, community and corporate foundations that responded, 69.3% were planning to exist in perpetuity, 9% were not, and 22% were undecided. Funders who had established foundations in the previous decade were more likely to indicate that they would not exist in perpetuity than those established before 1989. A 2007 Foundation Center report noted that "new foundations being created today are much bigger, and much more money is moving through them at a faster pace than through older foundations."

The new billionaires and other people of means now entering the philanthropy sector are likely, by both size of their investment and their ideas about giving, to influence how foundations conceive of the relationship of mission, payout and lifespan. New, strong interest in the effectiveness of philanthropy and how to create greater impact may well result in the continued questioning of existing foundation procedures, and the discovery of new ways in which the vast and growing reservoir of charitable dollars can be used to benefit humankind.

[ << A DIFFERENT STRATEGY | BIBLIOGRAPHY >> ]

  Resources

• Executive Summary
• Full Report
• Order Print Copies

  Report Contents

• Introduction
• Focus: The Whitaker Foundation and the Helen F. Whitaker Fund
• The Learning Curve: The Beldon Fund
• Retooling for Spend Down: The Atlantic Philanthropies
• Giving While Living: The Richard and Rhoda Goldman Fund and the Lewis B. and Dorothy Cullman Foundation
• Quick Spend Down: The Haigh-Scatena Foundation
• Raising the Payout: Evelyn and Walter Haas, Jr. Fund
• Giving 5.5%: The Lynde and Harry Bradley Foundation
• More than Investment Returns: The Needmor Fund
• Ramping Up: The HKH Foundation
• Using All the Models: Endswell Foundation / Renewal Partners
• A Different Strategy: Omidyar Network
• Conclusion
• Selected Bibliography
• Resources
• List of Profiled Foundations
• Acknowledgements

  Upcoming Events

• November 29
  10am - Noon
  NCG Family Philanthropy Exchange and the Stanford Center on Philanthropy and Civil Society are hosting a discussion of Beyond Five Percent: The New Foundation Pay out Menu. This funders only event is free for members.
  learn more >>

  Supporters of
  “Beyond 5%”

• Beldon Fund
• French American Charitable Trust (FACT)
• Quixote Foundation

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