Philanthropy Needs a New Playbook to Fund Systems Change

We are living through an unprecedented, generation-defining moment, full of uncertainty and pain. Naturally, all of us—perhaps especially in philanthropy—are asking ourselves what we can do today to meet an urgent need.

But the coronavirus pandemic also underscores the failures of systems—from healthcare to social welfare to wage inequality and food insecurity—that exacerbate the crisis. As we rebuild, we should ask ourselves how we will support those seeking to address the root causes of these failures. We must avoid reverting to a philanthropic mindset of largely treating symptoms of underlying problems.

The question is: How to best do so? A new playbook, rooted in a collaborative research project and first featured in The Chronicle of Philanthropy, highlights philanthropic mindsets and practices that can support our renewed efforts to reconfigure systems for the good of all.

Editor’s note: This article below was originally published in The Chronicle of Philanthropy and is re-posted here with permission. 

This is the decade that matters for delivering on our most existential social problems. In 10 years, we will look back and ask ourselves— whether on climate change, on the health of democratic societies across the globe, on inequality and human rights and so much more—if our decisions made a lasting difference. If not, we’ll find ourselves treating worsening symptoms of underlying problems.

Many philanthropists know this. In fact, the conversation about “systems change” has exploded over the last couple of years. Systems change is still misunderstood, but at its core it involves tackling the root causes of a social problem (say, homelessness) by changing policies, power dynamics, the flow of money, talent, and other resources—and sometimes even transforming customs and mind-sets.

Think of people like Rosanne Haggerty, founder of the nonprofit Community Solutions, whose focus has long been on how to end homelessness permanently rather than build more homeless shelters. A solution like hers involves taking into consideration whether people have adequate economic opportunities as well as whether we have in place affordable housing policies and efforts to treat people with mental-health problems and substance addiction—and to remove the stigma that follows them. It takes tremendous coordination. And it works.

The problem is, with some exceptions, philanthropy is currently calibrated for treating symptoms. In other words, for building homeless shelters, not for ending homelessness.

How can it recalibrate? This is the question Ashoka asked more than 130 social entrepreneurs and grantmakers in a report we released with peers in our field like Catalyst 2030, Co-Impact, Echoing Green, the Schwab Foundation for Social Entrepreneurship, and the Skoll Foundation. Their observations led to the first global effort to bring together the people who want to fund systems change with the people doing the work in communities around the world.

And it underlines the imperative for a new culture and practice of philanthropy.

We use the word “culture” here deliberately. Social entrepreneurs and grantmakers alike emphasized this point more than anything else: Effectively funding systems change begins with a new mind-set, new values, and new behaviors that in turn shape better funding practices.

Three major themes stood out for us in particular:

Build trust with grantees and then fund accordingly (read: flexibly!).

Systems change is messy. It’s never linear. Underlying dynamics will shift, and even the most well-conceived business plans can fail. The best social entrepreneurs and movement builders will navigate these changes and adapt accordingly—if you let them.

When it comes to funding systems change in particular, transactional relationships (i.e., “go do this specific thing with these restricted dollars”) will fall short because they are fundamentally constraining. Unlike engineers working with clear formulas designed to give us reliable answers, systemic leaders build relationships and networks—seeing the far horizon and enabling individuals and organizations (well beyond their own) to shape new solutions. They are bound by purpose, not process. Trust-based funding will succeed precisely because it emphasizes these uniquely talented people and teams over projects with distinct beginnings and ends.

Strikingly, our study revealed that while 75 percent of social innovators reported having honest and respectful discussions with their grantmakers, only 25 percent said they were working in true partnership with them. Nearly 70 percent said grantmakers don’t sufficiently support them when their approaches need to change course. This lack of trust is reflected in the fact that today still only about one-fifth of all philanthropic dollars are fully unrestricted. Thankfully, a growing commitment is underway by foundation leaders—Ford, Hewlett, MacArthur, Open Society, and Packard Foundations—to end the “nonprofit starvation cycle” through what some are calling “pay-what-it-takes” philanthropy.

Let’s not confuse philanthropic accountability with rigidity. It is possible (and necessary!) for grantmakers to form partnerships of mutuality while remaining true to their goals and rigor. Groups like the Whitman Institute are a great place to learn about trust-based philanthropy and even survey how well foundations are doing to build trusting relationships with grantees.

Grantmakers must acknowledge what they don’t know. And then ask the experts.

A big part of building trust is approaching giving with humility and a desire to learn. Imagine starting a conversation with a potential grantee by asking “What do you think we are missing or getting wrong?” Or: “Why are we still seeing the problems that we see?” Such questions signal vulnerability and immediately cut through the power dynamic in the room.

Enlightened grantmakers are now shifting away from a “this is how we’ve always done it” mind-set and instead challenging their own assumptions, particularly when it comes to root causes. They consider their grantees—especially those who have experienced the problems they are trying to solve—as the trusted experts. One foundation we spoke with told us it has begun hiring stellar listeners as program officers and de-emphasizing subject-matter expertise. It also solicits regular conversations with grantees outside the application processes and cycles.

Such grantmakers, in fact, are mirroring the very characteristics that make the people doing systems-change work so effective—including, above all, empathy, which is essential to working with diverse teams and to countering the inevitable resistance to transformational change.

Of course, it’s possible to be humble and courageous at the same time. Systems change requires us to embrace uncertainty and make bets on what the world needs 10 years from now—not just on what we know works today. Yes, this involves some risk, but when grantees are true partners of foundations, creating and learning together, suddenly systems change doesn’t seem that risky. The real risk is not taking the risk.

Think long term and stop making one-year grants.

Changing systems (like mass incarceration, for example) takes years or even decades. But 50 percent of the systems-changing entrepreneurs we spoke with said they don’t get multiyear grants. That situation is simply not good enough.

As philanthropist Laura Arnold reminded us recently, one of the reasons funding-systems change is hard is that you don’t get immediate gratification and human connection from solving an acute need. But she also highlighted how philanthropy has the unique freedom to fund systems change, if people are willing to be more patient about the social impact they see.

Given that the “end game” of systems change is often a long way off, it is easier to be patient when we value process, participation, and inclusiveness as ends in themselves and not simply means. For example: When the very families most affected by mass incarceration pick up the mantle of change and lead a movement to end cash bail across the United States, systems change is already happening because “ordinary” citizens are organizing as change makers for the good of all. That, in many respects, is the definition of a resilient society.

These points are just the beginning. We must become more familiar with the strongest measures of systems change, for one. But let us commit to asking whether our daily mind-sets, priorities, and institutional processes are equipped to meet the bigness and urgency of the challenges bearing down on humanity today.