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Trust-Based Philanthropy: A Qualitative Analysis of Arizona's

Philanthropic Sector

Erin Owen Master's of Organizational Leadership

Capstone Project April 2022

Dr. Kathryn Terzano Arizona State University

Abstract:

Trust-Based Philanthropy: A Qualitative Analysis of Arizona's Philanthropic Sector

During the COVID-19 pandemic, philanthropic organizations moved resources to nonprofit grantees faster and with fewer grant restrictions, creating massive impact in local communities. This study aims to determine how, if at all, the COVID- 19 pandemic has affected how Arizona philanthropy engages in trust-based philanthropy with nonprofit grantees and the factors that promote or constrain the adoption of trust-based philanthropy in Arizona's philanthropic sector.

Trust-based philanthropy will generally be defined as a grantmaking phenomenon that is "rooted in a set of values that help advance equity, shift power, and build mutually accountable relationships" (Trust-Based Philanthropy Project, 2020). The approach used in this qualitative pilot study was through seven exploratory interviews with individuals or leaders from seven Arizona philanthropic organizations on the trust-based grantmaking practices at their organizations and their advice for other funders. The study's results demonstrate that most of the organizations interviewed were already engaged in trust-based practices prior to the COVID-19 pandemic and illustrate the urgency of advancing equity and shifting the unhealthy power dynamic between philanthropy and nonprofit grantees. This research illuminated philanthropic organizations' opportunity to flip the script on the rigorous grantmaking practices of the old and shift to a new paradigm of mutually accountable partnerships, equity, flexibility and increased responsiveness through trust-based grantmaking practices.

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Dear Reader,

Thank you for reviewing my research, Trust-Based Philanthropy: A Qualitative Analysis of Arizona’s Philanthropic Sector. This topic focuses on a small sample of Arizona's philanthropic organizations, specifically on the trust-based practices being implemented at their organizations and the factors that promote or constrain the further adoption of trust- based philanthropy. This report is intended to be used as a guide for philanthropic professionals who are interested in implementing trust-based practices in their organization's grantmaking.

While this research has illuminated the impactful work and partnerships being facilitated by Arizona philanthropy, it has also highlighted the vast possibilities available for Arizona's philanthropic sector to more authentically partner with nonprofit and community partners to pave the way for a state that is more equitable, inclusive, and reflective of Arizona's vibrant communities.

Thank you to the leaders who generously gave their time to share their experiences with me. I am grateful to learn from each of you.

In partnership, Erin Owen Student, Master's of Science in Organizational Leadership College of Integrative Arts & Sciences, Arizona State University

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INTRODUCTION

What is Trust-Based Philanthropy?

Sparked by the COVID-19 pandemic, massive changes occurred in the nonprofit and philanthropic sectors beginning in March 2020. Funders and nonprofit organizations partnered more effectively and efficiently, and this swift action created significant change, especially in vulnerable populations in dire need of support (Nowski, O'Flanagan, Taliento, 2020). The efficient partnership between philanthropy and nonprofit grantees due to philanthropic organizations removing barriers and redistributing power to nonprofit organizations reflects the notion of trust-based philanthropy.

Trust-based philanthropy was introduced to the philanthropic sector by the Trust-Based Philanthropy Project, a "peer-to-peer learning and advocacy funding initiative to make trust-based practices the norm in philanthropy" (Overview, 2022). This group and subject matter serve as the inspiration behind this research topic and describe trust-based philanthropy as "At its core, trust- based philanthropy is rooted in a set of values that help advance equity, shift power, and build mutually accountable relationships" (Trust-Based Philanthropy Project, 2020).

Trust-based philanthropy also reflects the concepts of unconditional trust and minimal restrictions from a funder in how funds are spent by a nonprofit organization and "flips the script on traditional philanthropy" (Trust-Based Philanthropy Project, 2020). Trust-based philanthropy is based on the practice of unrestricted grantmaking. In this type of grantmaking, a funder provides a nonprofit organization with general operating funds to sustain its program operations and administrative costs, often referred to as "overhead" costs (Lecy & Searing, 2015). Trust-based philanthropy focuses on a community-centric ideal that encourages equal partnership, mutual accountability and unrestricted grant funding between philanthropic funders and nonprofit grantees.

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Purpose Statement:

The purpose of this qualitative study is to determine how if at all, the COVID-19 pandemic has affected how Arizona philanthropy engages in trust-based philanthropy with nonprofit grantees and the factors that promote or constrain the adoption of trust-based philanthropy in Arizona's philanthropic sector. Trust-based philanthropy will generally be defined as a grantmaking phenomenon that "is rooted in a set of values that help advance equity, shift power, and build mutually accountable relationships" (Trust- Based Philanthropy Project, 2020).

What drives the adoption of trust-based philanthropy? According to the Trust-Based Philanthropy Project, "the trust-based values function as a north star across four key dimensions of a grantmaking organization's work" (Trust-Based Philanthropy Project, 2022).

(Trust-Based Philanthropy Project, 2022).

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"We envision a world where relationships are built on vulnerability, transparency, and

humility; where community and nonprofit leaders are valued, supported, and trusted; and where funders bring an awareness of power and equity to their grantmaking."

-The Trust-Based Philanthropy Project (Trust-Based Philanthropy Project, 2022).

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Literature Review & Project Context:

The phenomenon of trust-based philanthropy is a modern approach to grantmaking and is a stark difference from the strict data-driven funding and grant reporting requirements of the past (Trust- Based Philanthropy Project, 2020). As the world entered a crisis in March 2020, a record-breaking number of charitable organizations and institutions made great strides in funding their grantees quickly, effectively, and more significantly than ever before. Nowski, O'Flanagan and Taliento describe the efficient and effective ways that philanthropic organizations supported their nonprofit grantees and state," The COVID-19 pandemic has accelerated moves to reduce those hurdles, prompting many foundations to relax grant requirements, speed up decision making, and give recipients additional flexibility in how they use funds" (Nowski, O'Flanagan, Taliento, 2020, p. 2). The authors also discuss, "The COVID-19 pandemic has prompted a number of donors to dig deeper into their endowments and change their grantmaking approaches…some have doubled or quadrupled their payout rates, others will distribute 20 percent of their total assets this year…All are recognizing that this historic pandemic demands an extraordinary response. If there ever was a time for foundations to consider permanently accelerating the pace and volume of giving, it's now" (Nowski, O'Flanagan, Taliento, 2020, p. 3).

A report published by Candid and the Center for Disaster Philanthropy entitled "Philanthropy and COVID- 19: Measuring one year of giving" examines COVID-19 related philanthropic funding in 2020. The report found, "By the end of 2020, 39 percent of dollars and 21 percent of gifts to specified recipients were described as unrestricted or flexible" (Colar & Moore, 2020). The Center for Disaster Philanthropy shared specific ways that grantmakers and donors can continue to provide aid flexibly for nonprofit organizations. Although Candid intended for the following suggestions to aid the recovery of COVID-19, these statements are vital for all funders to implement at any time. The report states, "Sustain or increase giving and make unrestricted and flexible grants, trust your grant partner and support operational and administrative costs, target funding to communities that are systemically marginalized…., make grants outside of traditional grantmaking circles…" (Colar & Moore, 2020).

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Along with providing support for a nonprofit organization's operational or overhead costs, trust-based philanthropy reduces the burden of grant seeking and reporting for grantees. The less rigorous grant application and reporting are especially vital for "small, community-based organizations" (Nowski, O'Flanagan, Taliento, 2020). Prior to the COVID-19 pandemic, many community-based or grassroots organizations faced challenges in receiving funding due to many charitable organizations' rigorous grant reporting requirements. Community- based or grassroots organizations often do not have the infrastructure or staffing of larger nonprofit organizations but fill the urgent needs of local communities and should also be supported by institutional philanthropy (Chowdury, 2021). With a focus on community-based funding, trust-based philanthropy offers grassroots organizations an opportunity to receive funding from funders they may have otherwise not obtained. More funding in the hands of community-based organizations means more resources for our nation's most vulnerable populations (Wells & Anasti, 2020).

As a result of these types of shifts to community-driven philanthropy, more studies have been conducted to examine the dynamic between the community-based approach versus the commonly-used practice of evidence- based philanthropy, which relies strictly on data and returns on investment to determine how much and where funding is directed (Easterling and Main, 2016). The results of these shifts are astounding and point to the need for an increase in trust-based philanthropy and a community-centric approach to funding local communities, as well as an emphasis on how philanthropic organizations can encourage further general operating support through new ways of evaluation (Riemer, 2017).

In addition to funding with a community-centric approach, another crucial area that trust-based philanthropy addresses are the commonly-seen public and performative commitments that many philanthropic organizations make to invest funds in a racially equitable way. Unfortunately, most of these commitments are never kept, and philanthropic organizations are not held accountable for their promises. Beer, Patrizi, and Coffman discuss this phenomenon and state that they "observe the biased structures, processes, and mental models that maintain a tenacious hold" (Beer, Patrizi, Coffman, 2021, p.65).

This power differential that persists among grantmakers and grantees is highly dysfunctional and enables funders to stay in their comfort zones and avoid instituting new organizational and giving practices. For this unhealthy dynamic to end, the principal and agent relationship must be flipped, and "evaluation and learning must facilitate opportunities for contestation and critique" (Beer, Patrizi, Coffman, 2021, p.73). The philanthropic sector now has a unique opportunity to retain the trust-based philanthropy grantmaking practices that have emerged during the pandemic to continue the transformative changes that have been made in local and vulnerable communities.

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"As funders step up and demonstrate greater flexibility and responsiveness, the question then becomes: Is their response merely a momentary adjustment, or will the crises of 2020 spur substantive, long-term change in how funders approach their work?" (Orensten, Buteau, Gehling, Malmgren, Marotta & Martin, 2020, p.1).

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Arizona's Nonprofit Sector

A 2021 study conducted by the Alliance of Arizona nonprofits demonstrates the devastating impact COVID-19 has had on Arizona's nonprofit sector. The report found that "the average nonprofit lost between 26-50% of their revenue" (COVID- 19 A Year Later, 2021). When nonprofit organizations were asked "what they need to stay afloat, the resounding response by 81% of nonprofits was unrestricted funding" (COVID-19 A Year Later, 2021). Trust-based philanthropy is a necessity for nonprofit organizations and their work in serving Arizona's communities. An increase in trust-based practices and unrestricted funding would enable Arizona's nonprofit organizations to fulfill the needs of the communities they serve more effectively and sustainably.

(COVID-19 A YEAR LATER, 2021).

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Methods

Dr. Robert Ashcraft, Executive Director, ASU Lodestar Center for Philanthropy and Nonprofit Innovation

Jaime Dempsey, Senior Vice President for Philanthropic Initiatives, Arizona Community Foundation

Joyce Medina Harper, Executive Director, The Dougherty Foundation

Kelly Huber, Vice President for Philanthropy, Community Foundation for Southern Arizona

David Martinez III, Director of Capacity Building and Community Engagement, Vitalyst Health Foundation

Katharine Len Yee Mitchell, Vice President of Community Impact, Women’s Foundation for the State of Arizona

Sarah Walczyk, Executive Director, Satterberg Foundation

The methods of this qualitative study consisted of seven exploratory interviews with professionals from philanthropic organizations who fund some of the more than 20,000 nonprofit organizations in Arizona (The 2020 Map of the Nonprofit Economy, 2020). These interviews focused specifically on the trust-based philanthropy practices of the individual's organization and the trust-based philanthropy their organization engaged in before, during, and post COVID-19 as well as their view on the barriers that may prevent trust-based philanthropy from being implemented in Arizona's philanthropic sector.

The researcher interviewed the following philanthropic professionals:

Contextual Interview:

Arizona Funder Interviews:

ASSUMPTIONS & LIMITATIONS The initial assumptions of this research are that due to the relatively new nature of the trust-based philanthropy movement and the highly political nature of many philanthropic organizations, some of the organizations the researcher interviews will not be engaging in trust-based philanthropy.

The limitation of this study is that due to the small sample size of the targeted participants, this research will not be an accurate sample of all Arizona philanthropic organizations. Thus, this research will serve as a pilot study for more extensive research on trust-based philanthropy practices of Arizona philanthropic organizations. This research also has the limitation of failing to address the perspective of Arizonan nonprofit organizations and the challenges they experience and offers the opportunity for further research to be conducted to demonstrate the urgency of trust-based philanthropy for nonprofit organizations.

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Summary of Findings: Overall, the researcher’s findings show that the participants' organizations were all engaged in some degree of trust- based philanthropy prior to the COVID-19 pandemic. Participants reported funding increased amounts of operational support for nonprofit grantees during the pandemic, with plans to continue trust-based practices through multi-year general operating support. A few of the organizations, in particular, reported engaging in significantly higher amounts of trust-based philanthropy with their nonprofit grantees and prioritizing equitable giving practices.

The primary theme revealed through the participant interviews demonstrated that philanthropic organizations' swift and effective response during the COVID-19 pandemic to nonprofit grantees has opened a gateway for the implementation of increased trust-based funding practices, especially for philanthropic organizations that were engaged in a small amount of trust-based philanthropy prior to COVID-19. Organizations that reported to have engaged in consistent trust-based practices before COVID-19 also reported the use of continued trust-based practices through the funding of unrestricted or multi-year operational support.

Additionally, in some organizations, this gateway has increased the interrogation of outdated grantmaking and internal organizational processes that may be hindering the redistribution of power to nonprofit grantees, resulting in further change. Participants also reported examining and updating grant applications and reporting requirements to be less rigorous and time-intensive for grantees and more equitable in the application method and application questions.

The second piece of this research topic aims to identify the factors that promote or constrain the adoption of trust- based philanthropy in Arizona’s philanthropic sector. The primary factor that was seen throughout participant interviews that promotes the adoption of trust-based philanthropy is that on the topic of equity and leadership. The philanthropic organizations engaged in the most significant amounts of trust-based philanthropy with nonprofit grantees each commented on aspects of equity in their organization’s internal and grantmaking practices. Additionally, these participants commented on their work in examining their relationship to power with their grantees and the community. Along with interrogating and reversing inequitable internal processes, participants who reported the most significant amounts of trust-based philanthropy also described having a less hierarchical staff structure and implementing an organizational structure that includes input from employees of all levels. Lastly, those who reported engaging in more trust-based philanthropy with grantees also discussed more authentic and open relationships with nonprofit grantees and said that their board of directors supported the implementation of trust-based practices.

Throughout all interviews, the resounding theme of the barriers that constrain trust-based philanthropy from being adopted in Arizona reflects the unwillingness of philanthropic leaders, board members, and trustees to change outdated grantmaking practices and redistribute power and decision-making outside of themselves and the institution in which they sit.

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Each participant was asked what advice they would give to funders looking to implement trust-based philanthropy in their organizations:

“We should trust organizations to do their work. They shouldn't have to perform for us. If they say that, this is something that we need funding for, and this is how we have envisioned a solution to a challenge, we don't have the kind of on-the-ground knowledge in many of these sectors. I think we have to trust them to be experts in their own work.”- Jaime Dempsey, Senior Vice President of Philanthropic Initiatives, Arizona Community Foundation (Dempsey Interview, 2022)

“It’s very much a reflecting on having people hold up the mirror to me and say, how are you really serving community? How are you sharing the power and privilege you've accumulated? And sitting with that for a minute. What privileges do I have?” - Joyce Medina Harper, Executive Director, The Dougherty Foundation (Harper Interview, 2022)

“So number one would be to start with a group of organizations you've worked with for a very long time, so you can have really good stories and know them. I mean, why make organizations who have you've been giving to for the last ten years consistently the same amount of money? Why are you putting them through all these hoops? Just simplify this all with them. You know, there are things that these groups want to do. Number two, ask your organizations what they need."

“I think, sometimes we get in our own way. We feel like there are certain aspects of trust-based philanthropy, and we think we have to do all of them at once and then, and then that'll be it. Sometimes it takes a long time to do it, and while yeah, we want to be responsive to the community and ultimately go on the other side of trust-based philanthropy and say that we're doing all the aspects. Maybe it’s a step-by-step or one or two things at a time. Do what you can, as you can, but keep at it. Keep beating that drum and working towards it. Especially with this concept of multi-year, unrestricted funding, I think, especially during the pandemic, it was shown that foundations can give up the power that they hold in funding quickly and relinquish power to other decision-makers.” - David Martinez III, Director of Capacity Building and Community Engagement, Vitalyst Health Foundation (Martinez Interview, 2022)

- Kelly Huber, Vice President for Philanthropy, Community Foundation for Southern Arizona (Huber Interview, 2022)

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“I think front and center is leadership. So boards who are very comfortable and used to doing things the way they have been done for years. I also think grantmaking practices that don't look towards what the community needs and where it's really led by some sort of top-down initiative. Also, the lack of transparency. This sort of sense that these boardrooms are secret, and these secret conversations that aren’t transparent to the community.”

" So this is just an idea, instead of trying to overhaul the entire thing, any organization could pilot something. And so like, I would my make a recommendation for people to say, 'Hey, we're going to try this. We're going to try this for a small amount of time and we're going to reflect on it. And then we're going to make a decision' rather than like coming in and being like, everything we're doing is wrong. And then you can compare the two different ways of doing this. I know this might take a little bit of more energy, but nothing is more affirming than not reading a grant report, and sitting with partners who are like 'this type of funding allowed me to do this and I've never felt so supported'. There's just something different about hearing 'wow, I felt really heard and seen and trusted', that feels different than just reading a written report." - Sarah Walczyk, Executive Director, Satterberg Foundation

“It will take courageous philanthropists to be out in front, leading from the front rather than within, doing what they can do. There are not a lot of market forces driving their decisions. Where’s the truth to power?” (Ashcraft Interview, 2022).

- Katharine Len Yee Mitchell, Vice President of Community Impact, Women’s Foundation for the State of Arizona (Mitchell Interview, 2022)

Additionally, the researcher interviewed Dr. Robert Ashcraft, Executive Director of the ASU Lodestar Center for Philanthropy & Nonprofit Innovation to gain his unique perspective on Arizona's nonprofit and philanthropic sectors. When asked to comment on trust-based practices and Arizona’s philanthropic sector, Dr. Ashcraft responded:

Trust-Based Philanthropy: Getting Started Changing one's practices can be intimidating, especially in large funding institutions with rigid structures. The following page includes six specific practices from the Trust-Based Philanthropy Project for organizations to shift from traditional grantmaking models to be more trust-based, to help funders "authentically partner with grantees in a spirit of service" (Practices, 2022).

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SIX KEY PRACTICES OF TRUST-BASED PHILANTHROPY

(Practices, 2022).

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Researcher's Reflections

The 4 Dimensions of TBP: Practices, Culture, Structure, and Leadership The 6 Grantmaking Practices of Trust-Based Philanthropy Trust-Based Guides & How-To's

Additional resources for grantmakers:

I thoroughly enjoyed conducting this research with leaders of Arizona's philanthropic sector. Having worked at multiple local nonprofit organizations, and now being in a role supporting Arizona funders, I've observed the intense power dynamics that persist between funders and nonprofit grantees. Often, funders who engage in trust-based funding practices through interrogating and reversing power dynamics, and organizational processes are viewed as "heroic". The interviews throughout this research have revealed that there are many folks in Arizona philanthropy with a strong desire to delve deeper into trust-based philanthropy and equal partnerships with nonprofits, but who may be constrained by the institutions where they work.

It is my hope that Arizona philanthropy will continue to be open to a new way of philanthropy, one that could transform Arizona's philanthropic sector and lead to equal partnership and mutual accountability with Arizona's nonprofits and communities.

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RESOURCES: Alliance of Arizona Nonprofits. A Year Later: COVID-19's Impact on Arizona's Nonprofit Sector. (March 12, 2021). Retrieved from: https://cdn.ymaws.com/arizonanonprofits.org/resource/resmgr/COVID-19-_A_Year_Later_Final.pdf

Alliance of Arizona Nonprofits. The 2020 Map of the Nonprofit Economy. (February 24, 2020). Retrieved from: https://arizonanonprofits.org/news/490515/The-2020-Map-of-the-Nonprofit-Economy.htm

Beer, T., Patrizi, P., & Coffman, J. (2021). Holding Foundations Accountable for Equity Commitments. The Foundation Review, 13(2). https://doi.org/10.9707/1944-5660.1565

Beer, T., Salehi, S., Cairns, B. A Power Reckoning on Trust in Philanthropy, From Both Sides of the Pond: Part 1. Trust-based philanthropy project. 2021. Retrieved from: https://www.trustbasedphilanthropy.org/blog-1/10-18-what-will-it-take-for- tbp-to-stick-s8w9d

Colar, A., & Moore, Y., Philanthropy and COVID-19: Measuring one year of giving. Candid. 2020. Retrieved from: https://candid.org/about/press-room/releases/new-report-finds-that-more-than-20-billion-went-to-covid-19- philanthropy-in-2020

Chowdury, R., et al. "Power of Paradox: Grassroots Organizations' Legitimacy Strategies Over Time." Business & Society, vol. 60, no. 2, SAGE Publications, 2021, pp. 420–53, https://doi.org/10.1177/0007650318816954.

D. Martinez. Interview. April 5, 2022.

Easterling, Douglas, and Deborah Main. "Reconciling Community-Based Versus Evidence-Based Philanthropy: A Case Study of The Colorado Trust's Early Initiatives." The Foundation Review, vol. 8, no. 4, Dorothy A. Johnson Center for Philanthropy at Grand Valley State University, 2016, pp. 81–107, doi:10.9707/1944-5660.1329.

How can philanthropy redistribute power? Trust-based philanthropy project. 2020. Retrieved from: https://www.trustbasedphilanthropy.org/

J. Dempsey. Interview. April 6, 2022.

J. Medina Harper. Interview. March 28, 2022.

K. Huber. Interview. March 23, 2022.

K. Len Yee Mitchell. Interview. April 1, 2022.

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Lecy, Jesse D., and Elizabeth A. M. Searing. "Anatomy of the Nonprofit Starvation Cycle: An Analysis of Falling Overhead Ratios in the Nonprofit Sector." Nonprofit and Voluntary Sector Quarterly, vol. 44, no. 3, SAGE Publications, 2015, pp. 539–63, https://doi.org/10.1177/0899764014527175.

Nowski, T., O'Flanagan, M., & Taliento, L. (2020). A transformative moment for philanthropy. Orensten, N., Buteau, E., Gehling, K., Malmgren, K., Marotta, S., & Martin, H. (2020). Foundations Respond to Crisis. Center for Effective Philanthropy.

Practices. Trust-based philanthropy project. 2022. Retrieved from: https://static1.squarespace.com/static/607452f8ad01dc4dd54fc41f/t/6165b42c2543b05926f6910c/16340552128 36/6+Grantmaking+Practices+of+TBP_Oct2021.pdf

Riemer, Annemarie, et al. "A Community Foundation's Experience Implementing and Evaluating General Operating Support." The Foundation Review, vol. 9, no. 2, Dorothy A. Johnson Center for Philanthropy at Grand Valley State University, 2017, pp. 23–35, https://doi.org/10.9707/1944-5660.1363.

R. Ashcraft. Interview. April 8, 2022.

"Study Shows Importance of General Operating Support, Capacity‐building Grants for Nonprofits." Nonprofit Business Advisor, vol. 2020, no. 370, Wiley Subscription Services, Inc, 2020, pp. 6–8, https://doi.org/10.1002/nba.30798.

S. Walczyk. Interview. March 30, 2022.

Trust-Based Philanthropy Project. 2022. Retrieved from: https://www.trustbasedphilanthropy.org/

Wells, R., Anasti, T. Hybrid Models for Social Change: Legitimacy Among Community-Based Nonprofit Organizations. Voluntas 31, 1134–1147 (2020). https://doi.org/10.1007/s11266-019-00126-3

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