Philanthropic Due Diligence: Exploratory Case Studies to Improve Investments in Urban Schools
August 2002
Christine Campbell, James Harvey, Michael DeArmond
This paper will help funders avoid some of the pitfalls of embarking on major reform initiatives in troubled urban districts. The paper has three parts:
- An explanation of what is behind the two big flaws of philanthropic investment;
- A description of a tool developed by the Center on Reinventing Public Education that foundations can use to avoid these pitfalls: the Exploratory Case Study Method; and
- Two examples of the method in action and how funders could use it.
Many foundations have put funds into urban school reform. It seems clear that philanthropies are now re-assessing their strategies, looking under the hood and kicking the tires before they invest, and even demanding changes in governance and management as a condition to grantmaking. This paper proposes “Exploratory Case Studies” as a tool to improve philanthropic giving. It suggests that case studies can help funders target resources on districts with the greatest need while finding a better fit with beneficiary districts.
Since A Nation at Risk warned in 1983 of a “rising tide of mediocrity” in American public and private schools, foundations have invested record amounts in public education. Once primarily interested in colleges and universities, philanthropists have turned increasingly to K-12 schools, more than doubling the proportion of their funds spent in supporting K-12 education, according to several accounts. By 2000, it was estimated that philanthropic giving for K-12 education totaled $1.4 billion, of which 25% was directed at education reform.
Although looming large as a proportion of philanthropic giving, foundation support for K-12 schools is a relatively small part of school budgets. In 1997-98, private giving to public elementary and secondary schools in the United States, including gifts and “tuition and fees from patrons,” amounted to just 2.6% of school revenues, according to the National Center for Education Statistics.
Shrewdly invested, philanthropic support of urban schools can accomplish a lot. Like a tiny rudder turning a large vessel, comparatively small amounts of foundation money can leverage major movement. Foundation efforts get a lot of attention and create substantial pressure locally. Community leaders disregard these dynamics at some cost. Foundations also typically bring a considerable arsenal of expertise to the table. Most school districts are eager to draw on this resource. And, of course, the critical importance of improving urban schools, enrolling nearly one-quarter of all students, cannot be overlooked if the nation’s larger school-reform agenda is to be achieved. Everyone from the school superintendent to the foundation president is eager to do something about the gap between the nation’s educational “haves” and “have-nots.”
Yet there are increasing signs that foundations are not entirely happy with the results of their investments to date. A number of straws in the wind indicate that philanthropies seek better-focused and more strategic use of their funds and are even prepared to demand significant improvements in governance and school management before investing.
For example, the high hopes of the Casey Foundation’s “New Futures” effort were hardly met. This was an ambitious multi-year program launched in the late 1980s to revitalize communities and schools simultaneously in some half-a-dozen cities. It concluded with some cautionary lessons for grantmakers about the amount of time required to effect real change. Part of the challenge, clearly, was the difficulty of getting all the actors in schools, community agencies, and health care facilities on the same page at the same time. Also early in the 1980s, the Pew Charitable Trusts abandoned its “Children’s Initiative” after concluding that $60 million over ten years was unlikely to make much progress in improving fragmented efforts in education, health, and social outcomes for children. Like the Casey effort, the challenge of achieving Pew’s objectives looked insurmountable given the time and resources devoted to the task.
Efforts devoted exclusively to schools also appear to have fallen short. That, at least, was the conclusion of an analysis earlier this year of the Annenberg Challenge. The “Challenge” was financed by billionaire Walter Annenberg’s $1.1 billion gift to some of the nation’s most beleaguered schools. The analysis concluded that the “Challenge” had helped improve academic performance, but had not created the kind of dramatic system improvement sought when Annenberg launched the program in 1993. Annenberg officials acknowledged that they had underestimated what would be required to bring gains to scale. Within weeks of the release of that report, three Pittsburgh foundations (the Heinz Endowment and the Grable and Pittsburgh foundations) flexed their muscles in announcing a joint decision to suspend $3 million awarded to the Pittsburgh public schools. The foundations cited poor fiscal management and a breakdown in governance between the board and the superintendent as precipitating factors in this unusual decision.
The reasons behind these disappointments are many and varied. Large among them loom the intractability of the problems children and schools face in many troubled communities. Yet the need to persevere in these efforts is transparently clear. Literacy, civic empowerment, and economic productivity all depend on effectively functioning public schools.
Achieving those important social goals will require funders to become more strategic in their school investments. This paper suggests that foundation giving needs to be backed up by a clear theory of change and that foundation officials need to know whether the districts in which they plan to work or are already working match the foundation’s interests. In short, foundation officials need to focus on how they think schools will improve and they should not hesitate to look under the hood and kick the district’s tires before taking a test drive. “Exploratory Case Studies” with prospective district partners represent one way to proceed. Like “due diligence” in the private sector, exploratory case studies can help foundations understand whether they’re about to enter a good match and, equally important, remind both foundation and district officials that effective grantmaking must tie funding to a theory of change.
