The New Philanthropists: Evolution of Community Foundations

For more than a century, community foundations (“CFs”) have been dedicated to addressing local community needs and supporting local nonprofits.

Modelling place-based impact trusted by many, the field has grown to encompass about 700 CFs across the United States, with assets under management ranging from a few million dollars to more than ten billion dollars.

With CFs now a giant component of the philanthropic industry, their traditional models have undergone significant disruption in recent years. More specifically, we have observed the following shifts in the community foundation formula:

Disrupted business models

The community foundation business model is undergoing increased disruption resulting from, among other developments, the explosive growth of competitive donor advised funds being offered by for-profit banks and fintech start-ups, the increase in bespoke affinity groups pooling funds, and new wealth opting to establish foundations.

Shifting landscape

The donor landscape is shifting across the country with a new and increasingly diverse generation participating in philanthropy. This evolution coupled with a disrupted business model is prompting community foundations to differentiate their offerings and approach to delivering and influencing place-based impact.

“Customer” identification

With increasing frequency, community foundations are being challenged to define their ultimate “customer,” whether the donors themselves or the communities and beneficiaries they seek to support.

“Ecosystem coordinators”

Community foundations are more frequently being called upon to serve in the role of “ecosystem coordinators,” working to strategically bring together private, public, and non-profit actors to drive impact.

Community representation and inclusion

Community foundations are under increasing pressure to ensure that their leadership is reflective of the communities they serve and that their grantmaking processes are participatory and inclusive.

Accountability and measurement

As community foundation AUMs grow, so does their visibility and scrutiny. Communities are increasingly asking their CF to provide metrics on the impact of their structure and investments. Many CFs are moving away from a strictly AUM model (assets under management) to an AUI model (assets under influence), thus shifting their traditional operating model from one that takes direction solely from donors to institutions seeking explicitly to influence donor-directed giving. With this shift, some CFs are also trying to increase their board-directed giving and lean into their community leadership role as “ecosystem coordinators.”

New giving structures

Many quicker and more streamlined cash grant-making processes that were introduced across the COVID pandemic, are now being retained and used more frequently than ever before.

The community foundation’s evolution and its impact on leadership

Alongside these trends, significant leadership transitions are afoot within the country’s largest CFs. Many long-term and iconic leaders responsible for stewarding their organization’s growth have recently retired or will soon be stepping down, making way for a new generation of CF leadership. CF boards nationwide are carefully considering the skills and competencies required of the CEOs who will be required to navigate toward increased social impact during a period of disruption.

From our work advising leading CFs on their most pressing strategic leadership challenges, we have identified that successful community foundation CEOs need to be:

Connective conveners, brand builders, & influencers

• Enthusiastically and authentically building strong relationships within the region, demonstrating strong emotional intelligence and an ability to communicate clearly and persuasively.
• Possessing an ability to retain donors, persuade and cultivate next-generation and new donor networks, and manage conflicting donor interests through a collaborative relationship with the board.
• Effectively representing their foundation in the regional communities it serves and on the national stage.

Transformational leaders and managers

• Setting priorities decisively, delegating responsibilities, assuring accountability, and allocating resources appropriately to ensure sustainable results through excellent execution.
• Managing the structure and processes of the foundation, with the business acumen required by new financial models.
• Preparing the foundation for leadership succession.

Savvy fundraisers & business developers

• Understanding a wide and ever-changing array of financial products and donation vehicles, as well as the donor-specific value proposition for each.

A creative and strategic decision-maker

• Willing to take risks and test new technologies and structures, while balancing thoughtful considerations of their implications.
• Demonstrating an entrepreneurial and creative approach to developing new, innovative ideas that will best position the foundation in its service to the community.
• Seeking and analyzing data from a variety of sources to support decisions and align others with the organization's overall strategy.

A passionate leader committed to shared values, including

• A deep and abiding passion and connection for the region and the work.
• Demonstrated personal and professional commitment to diversity, equity, and inclusion, and track record of translating an organization's diversity and inclusion values and commitments into specific strategies and actions.
• Dedication to building an internal culture of trust, respect and strong internal communications.
• Cultural acuity, emotional intelligence, empathy, and integrity.

Authors

Tory Clark co-leads Russell Reynolds Associates’ Global Development, Advocacy and Philanthropy practice. She is based in Atlanta.

Vanessa Di Matteo is a member of the Russell Reynolds Associates’ Social Impact and Education Knowledge team. She is based in London.