NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, May 8, 2015

Not long ago, I wrote about the Ford Foundation’s overhead expenses, pointing that it had spent over $1 billion in the past decade on personnel and office space. That’s a shocking amount of money that never made it to poor people or starving artists or struggling students or others in need.

Still, I felt bad singling out Ford because its overhead expenses are not so unusual for legacy foundations.

And I got to wondering: How much money goes to philanthropoids—as opposed to grantees—at other big foundations? And what’s the overall tab for the staff-intensive model of grantmaking that most of these behemoths embrace?

Well, here’s the answer: Over $600 million a year, and that’s just for staffing the top 10 U.S. foundations.

Now, before saying more about this big number, a few caveats: I don’t generally have a problem with good salaries for nonprofit professionals. You shouldn’t have to take a big financial hit for trying to make the world a better place, and competitive pay is needed to draw the best people into the social sector. Nor do I think foundations should have crummy offices in the Garment District or that program officers should have to stay at Motel 6 when they’re on the road.

My problem is with how these big foundations do business, hewing to a top-heavy model from an industrial era where nobody thought twice about centralizing authority in lumbering bureaucracies. And, of course, I’m hardly alone in resenting the power that foundations have aggregated to themselves by muscling up with lots of staff and exercising control over nonprofits through an endless trickle of program grants that keep NGOs in a permanent state of semi-starved obeisance. This has been a source of festering anger for, well, decades now.