For Good Measure
President of the William and Flora Hewlett Foundation and former Dean Paul Brest is quoted in The New York Times Magazine about new approaches to fund-raising in which a fund-raiser looks at "philanthropy the way a money manager might":
Paul Brest, the president of the Hewlett Foundation, which is experimenting with this approach, addresses this subject in a forthcoming book. “I think these attempts for philanthropies to think as investors as a metaphor is fairly new,” Brest told me, “and so is the decision to use metrics to help you guide those investment decisions.” Brest traces the impulse back to the late 1990s and to a Bay-Area foundation then known as the Roberts Enterprise Development Fund, which was run by Jed Emerson. Brest says that what Emerson did in the late 1990s, at the behest of the philanthropist George Roberts (the “R” in the leveraged buyout firm Kohlberg Kravis Roberts), was back small entrepreneurial ventures (for example, cafes or bike-repair shops that employed recovering addicts or the formerly homeless) and then measure — even monetarily — the effects. The Roberts fund calculated that a charitable grant to a nonprofit would yield an array of monetary benefits to the newly employed (better incomes and financial stability) as well as social benefits (new tax receipts from new-employee income, lower social service costs). The fund’s charitable grant, in other words, produced ongoing “social returns” that greatly magnified the amount of the initial investment.
Paul Brest, the Hewlett Foundation president, sees this as invigorating. Brest worries slightly that a philanthropic community too focused on equating grants with cost-benefit measurement could veer toward projects that are easily measured. Such a tilt could give short shrift to the performing arts. Another possible danger is an inclination to compare the hypothetical “returns” of financing a project on climate change, say, with a program to help disaffected youth. “There are apples and oranges,” he says, “and then there are apples and kangaroos.”
Still, Brest adds, what he likes about some of the boldest metrics initiatives at foundations is that they are starting to push the entire field forward. In that regard, they may be taking up the challenge Warren Buffett observed — to attack problems that have resisted vast sums and great minds — when he made his donation to Gates. The foundations that finance social innovation could conceivably use a little innovation themselves. “If people don’t try,” Brest says, “then we’re not going to find out what the limits are.”