Foundations are more consciously getting into the business of nonprofit capacity building.  As one influential article recently argued, if foundations want their grantees to thrive beyond the nonprofit starvation cycle, they must “take the lead” in investing in their grantees’ marketing, fundraising, management, IT, and other nuts and bolts organizational capacities.

My consulting firm has partnered with foundations on capacity building projects across the country and especially in California.  Among the regions we operate, the Bay Area (where we started) tends to hold the reputation for innovation: it is home to huge established thought leaders like Hewlett, Packard, Silicon Valley Community Foundation and high profile newcomers like Skoll and Tipping Point.  But if I had to pick the region that has most impressed me with new advances in the field, I would choose its less sexy (in the philanthropic industry, at least) and financially weaker cousin down south: Los Angeles. 

The reason for Los Angeles’ quiet but notable pace of innovation?  One word: collaboration.  The region is breaking new ground for how foundations can work together to build capacity in their grantees.

Here are three main examples of the kind of collaborative capacity building happening in L.A.

• Constructing a Marketplace for Capacity Building Services

In 2010, the Weingart Foundation (one of the largest ones in the region) commissioned a landmark study on the issue of capacity building for local nonprofits.  Among its many findings, the report documented how nonprofit leaders simply didn’t know how to locate valued service providers – and neither did anyone else.   As a result of the findings, 10 foundations have each pooled $10,000 to fund a planning project to develop some sort of online marketplace where service providers and nonprofits can more easily get matched.  The project is currently underway.

• A Planned Giving Department Ready To Go

According to the California Community Foundation, Los Angeles (like many metropolitan areas) will undergo a massive intergenerational transfer of wealth in the next decade.  Planned giving programs are a key way that nonprofits can connect to families undergoing that transfer.  But such philanthropic programs require a certain financial and legal infrastructure to be in place.  The Community Foundation’s Executive Vice-President John Kobara offered his institution’s infrastructure to its grantees at essentially no cost to any of its grantees.  Nonprofits unfortunately have been slow to recognize the value of this offer, but the experiment represents a very strategic expression of a key concept: a foundation recognizing that it can multiply its impact by drawing in other donors – and enabling nonprofits to reach the aggregation.

•  Growing the Board Development Pie

Another expression of this concept is in the LA foundation world’s emerging involvement in nonprofit board development.  In recent years, large corporations have been leaving LA, taking with them a large number of business executives that have typically served as “rain-making” board members for local nonprofits.  The Annenberg Foundation has recognized this critical deficit and embarked on a multi-year journey of experimentation and innovation.  The result is Annenberg Alchemy, a series of gradually more advanced programs in board development that executive directors and board members attend together.  Especially fascinating to me is how the most advanced level involves 18 foundations contributing $10,000 each so that graduating organizations (which were selected by the foundations) receive a grant as a reward for successful completion of the program.  These foundations are in effect collaborating to incentivize nonprofits to widen donor bases beyond institutional grants.  Annenberg LA’s Director of Operations Sylia Obagi believes this encouragement of other foundations is one of the most helpful roles that her foundation can play.  In the Alchemy program, these same 18 foundations also meet regularly to share lessons being learned about capacity building. 

Why Los Angeles?

Other interesting initiatives exist (such as the effort of the Conrad N. Hilton foundation and partner funders to build a shared marketing capacity of Catholic schools).  Taken as a whole, the collection demonstrates the region’s unmatched depth and variety of philanthropic collaboration around capacity building.  I am not aware of any other region that is currently home to not just one, but two collaborations where double digit numbers of foundations are each pooling $10,000 into a common capacity building project.  Why is this happening in L.A.?

I believe there are three big factors in this emergence.  And each of these factors is relevant for any other region looking to emulate L.A.’s example.

Factor #1: A Crisis

“As foundations, we traditionally preach collaboration to our grantees,” said Wendy Chang, Program Director of the city’s Dwight Stuart Youth Fund, “but we’re the worst offenders.” Collaboration requires compromising one’s own ways, and foundations can easily get entrenched in their ways with little external pressure to change. 

But there’s nothing like a crisis to throw people together and force change.  The financial meltdown of 2008 rocked the foundation world in general by wiping out large chunks of endowments.  But the scale of the crisis was and is especially overwhelming in L.A.  There is the combination of California’s government deficit, the sheer number and diversity of vulnerable populations in the city, and then the unrivaled geographic sprawl of the metropolitan area.  Nike Irvin, VP at the California Community Foundation, believes that the combination “makes it difficult to hold to any illusion that one foundation can go it alone and make a dent in the crisis.” 

The crisis also underscored the need for capacity building.  Wendy Garen, President and CEO of the Ralph M. Parsons Foundation said that LA foundations didn’t talk that much about capacity building ten years ago.  But when foundations lost 30% of its own assets – as her foundation did – while witnessing an unprecedented level of financial fragility in their grantees, “everyone starts to recognize how much they have to work together.”

Factor #2: Trust

Collaboration requires personal trust between leaders.  And trust only happens when there is a context for new relationships to be built.  I have been struck by the number of formal and informal gatherings in the sector, and how consciously they have been pursued.  For instance, the collaboration to build a marketplace for capacity building services can trace its roots to the Nonprofit Capacity Building Roundtable (funded by the Annenberg Foundation and facilitated by the USC Center on Philanthropy and Public Policy).  The Roundtable did not formally accomplish anything, but several participants I interviewed felt that the relationships fostered there were absolutely essential to the eventual initiative.  Other convening bodies like the Southern California Grantmakers also contribute to the density of relationships in the region.

Factor #3: Peer leadership

A successful collaboration requires someone to step forward.  But not too far forward.  Someone to own the effort.  But not exclusively.  Someone who’s willing to take the risk.  But not reward oneself with credit.  Belen Vargas, VP at The Weingart Foundation, described to me how carefully and intentionally her foundation – led especially by foundation President Fred Ali – tuned into the responses of peer foundations.

To execute this kind of subtle balancing act, peer leaders have to share a similar enough cultural background so as to read cues, anticipate feelings, and stay within the unspoken lines.  Trent Stamp, ED of The Eisner Foundation, believes that the smallness of the LA foundation world is an advantage in building a sense of collegiality.  What is also striking about this small world is how many of the individuals crossed over from “the other side” of the grantor-grantee relationship.  The more established professional track in philanthropy that exists in the East Coast and even the Bay Area hasn’t had time to take root in LA.  So many foundation executives share a common background.  Indeed, when interviewed, several of them without prompting would describe peers with phrases such as “He and I both came from the trenches.” 

What about your region?

If you desire the kind of collaboration that is happening in LA, consider how those factors are in play in your region. 

• What is the big crisis that could potentially compel people to work together? 
• How can you invest in the necessary groundwork of personal trust between the key parties?
• Who can act as the peer leaders in the collaboration?