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KAI RYSSDAL: Up at the top of this program every day you hear from the money people. Marketplace is supported by . . . and then often the name of a foundation. Those foundations control about $550 billion worth of charitable assets in this country. They give away billions, too. Today as our philanthropy series continues, how many foundations have taken a page from the for-profit handbook. Ashley Milne-Tyte reports.
ASHLEY MILNE-TYTE: It's mid-afternoon at the Harlem Children's Zone, a nonprofit that supports poor families in New York City. It offers parenting classes, health services and schooling for kids. On the second floor, a class of preschoolers in maroon and gray uniforms is just settling down for their afternoon nap. Four-year-old Nigel seems confident his education is off to a good start.
Nigel: I always learn about numbers and letters.
Milne-Tyte: So what did you learn today?
Nigel: A and B.
The Harlem Children's Zone receives funding from various sources, including the Edna McConnell Clark Foundation. In the past few years the foundation has changed the way it does business. It used to support several causes. Now it has a single aim: helping disadvantaged kids become successful adults. It's also changed its strategy. Today it finds charities with proven track records, and gives them money to spend as they wish.
Geoffrey Canada: And I have to tell you, I just couldn't believe my ears when I heard that.
Geoffrey Canada is CEO of the Harlem Children's Zone. He was surprised because foundations usually attach strings to their largess: they come up with a goal, then pick a charity to achieve it. Sometimes the foundation's goal and the charity's own vision don't quite match. But because the charities need the money, they don't have much choice.
Canada says the Clark Foundation is allowing him to spend its money on his own dream: he's getting more families into his program. And he's extending his educational offerings all the way down to preschoolers.
Canada: And because it was our own plan, my whole staff became very heavily invested because it was ours, versus someone else's plan that we then had to sell to people and say "This is the next thing we ought to be doing."
Of course there were some strings attached. Nancy Roob is president of the Edna McConnell Clark Foundation. She says the foundation adjusted its approach to funding nonprofits so it was all about results.
Edna McConnell Clark: Ensuring that our investments in those organizations were tied to performance metrics.
Roob says the foundation works out a business plan with the grantee and agrees on targets. As long as the targets are met, the grant money keeps flowing.
Foundations of all sizes are beginning to pay more attention to measuring their effectiveness. Phil Buchanan is president of the Center for Effective Philanthropy. He says in many cases it's because they're run by relatively young entrepreneurs...
PHIL BUCHANAN: ...Who tend to be pretty impatient to see results. They've seen results in their business ventures very quickly and they want to see results in their philanthropic work quickly as well.
The Clark Foundation's new approach to supporting the Harlem Children's Zone seems to be working out so far. Canada's organization hit around 95 percent of its targets last year, in areas like improving reading scores. And getting kids who were seriously behind up to school readiness level.
Nancy Roob says the foundation's decision to change tactics is making it a more effective donor. Key to its strategy is finding experts like Canada and others...
Nancy Roob: ... Who are delivering proven services and know what to do to make a critical difference in the lives of young people.
Foundations can still feel warm and fuzzy about their mission -- perhaps even more so now they can measure the effects of their donations. And with these kinds of business practices in place, no one applying for funding can consider them a soft touch.
In New York, I'm Ashley Milne-Tyte for Marketplace.