Romanian Community Foundations leaders teamed with Jan Kroupa for an upcoming Endowment Consultancy Marathon. In order to mark this endeavour, we asked Jan to take us on a short, but challenging journey with some interesting stops: endowment building, myths, trust or major donors. Jan Kroupa has 20 years of experience as an international consultant, trainer and researcher in the field of philanthropy, resource mobilization and civil society leadership development in more than a dozen countries around the world, primarily in Central and Eastern Europe. He is the co-founder of the Czech Fundraising Center and the Chair of NETT – the Civil Society Think Tank. Jan serves on boards of several non-profits in the CEE region.
Jan is also an active musician and marionet theatre actor and playwriter.
For how long have you worked with Community Foundations and how do you appreciate this “journey” and their evolution?
I have been working with CFs both in Europe and in the US and in Canada for 25 years, but my more extensive work with the Federation of Romanian Community Foundations started some 5 or 6 years ago. It was a very gratifying journey, for it seems to me that Community Foundations tend to attract extremely bright and talented people. I find that particularly true in Romania. And being around bright, young and talented people who care is always a great joy for me. In fact, it is probably what I like best of all.
Do you see differences between Romanian philanthropy and other cultures, for example Czech philanthropy?
Not really. Romanian philanthropy reminds me of Czech philanthropy 10 or 15 years ago. Of course, you can find some minor culturally specific factors – in how you phrase things, in body language etc., but in principle we all clearly belong to the Transatlantic philanthropic tradition. So the only major difference that I see is how long has that philanthropic tradition been actively lived and practiced – both by donors, but even more importantly by foundations and other fundraising organizations. So, the UK, US, Czech and Romanian culture of philanthropy is the same, only we are each at a different stage along the way of practicing it. Do not forget that the first community foundation was set up in Cleveland in 1914, the first one in continental Europe (in Slovakia) in 1992, the first Czech CF in 1996 and the first Romanian CF in 2008. I am not suggesting that we can comfortably sit back and enjoy the ride – and that time will do the trick. What I am saying is that if we dream big and work hard, we just might have a billion EUR endowment foundation both in the Czech Republic and in Romania 50 or 70 years from now… and beyond.
For the ones that are learning for the first time about endowment, what would be a short and maybe out of the box definition?
People sometimes see endowment as a community savings account for a rainy day. That may be part of it, but for me, it does not capture its nature in full. In the middle ages, when you wanted to build a little chapel on a hill outside a village, you had to set aside a piece of property – like a little piece of a field, a lake or a forest – that would be sufficient to yield resources to maintain this property: to cut the grass around it, to paint it once in a while etc. These are the first examples of an endowment. And I believe that we all have that experience: there is the initial investment and there is maintenance, long-term sustainability. There are different in nature for it is much easier to ask donors to support the new, innovative, shiny projects and ideas. But who is going to make the „good old”, time-tested and proven project going? So I see endowment as a community maintenance fund – an independent and reliable source of income to keep alive programs and activities which have proven valuable and impactful over time.
Even the MET, the iconic New York City museum — with a $3.3 billion endowment and a 150-year history of generous donors — has struggled amid the financial shock. The pandemic, unemployment, health crisis made planning tough. In your opinion, what are the key actions a foundation should initiate in order to secure funding under the current environment?
Well, that is a short-term point of view only. When the stock market goes down, the value of your endowment decreases as well. Some foundations lost as much as 20-40 % of the value of their endowment during the real estate crises of 2007-8. But by 2010, they have all bounced back and have been growing ever since. So, of course the MET struggled, just like many others. But the correct questions to ask would be: How difficult would their struggle be without the endowment? And would they have survived without it?
Has anything good come out of this virus disaster?
I am not sure; I really do not see much of that… and I almost feel as if everybody tried to see all the benefits of the pandemic. At the beginning, I thought that people will revisit their values that some would be inspired or forced to think about what are the truly important things in life… Now, in retrospect, it feels like wishful thinking and I must say that some months later I do not see that to be the case for most. But that is OK. Hopefully, it has been true for some, for a few. We do not need majority to change the world. It takes committed and good-willed leaders to change the world for the better.
So, what I see right now, is that, perhaps, we may fly less, which would be good, I guess, yet there is so much extra stress among people…
Sometimes, donors do not assimilate the whole concept of endowment. Could you name two or three myths regarding an endowment fund spread among the donors that the fundraiser must be prepared to tackle?
It is hard to generalize in this respect. Frankly, many people in our region still have no idea what endowment is. And only some national legal codes in the CEE region recognize and stipulate what endowment is, what legal status is has and how it can be managed. A few concerns that I hear repeatedly when talking to major donors in the region would include:
- „I am much better with money than the NGOs. Why should they make the investment? It is not their field of expertise. I will make the investment and then I will donate the proceeds.” … Well, often enough, this may be in fact true. CFs are conservative investors; their role is not to make + 25 % one year and – 15 the next. Well managed endowments in Europe generate some 5 to 7 % p.a. This is true for the Czech Republic also. But they do that year after year over the long-haul. Donors who plan to annually donate from their investment proceeds hardly ever stick with that decision for many years, so they may be more successful short them, but do not offer the kind of sustainability that a conservatively invested endowment would. Also, all good foundations have investment boards of advisors or asset managers, so donors do not have to worry that foundation staff would think that they are very knowledgeable about investing and property management.
- „I want to make an immediate impact, why would I want to freeze money in an endowment? I do not understand what a charitable foundation needs permanent funds for, it does not make sense to me. A good charity runs on the energy of people who run it. When this energy runs out, the organization should close down.” … Well, clearly, making an endowment gift is not for everybody. And that is OK. Donors and their preferences are just as diverse as charities and the causes they serve. It takes somewhat specific a mind set and long-term thinking to choose endowment as the most attractive philanthropic opportunity. From what I can tell, it starts to make sense to people after they hit certain age. Young people accumulate wealth, middle age people secure it, older people distribute wealth. And community and charitable endowments clearly fit – along with other tools – into the last category.
Trust is fragile. What would you recommend an NGO in order to earn the trust of a donor?
Talk to them. We seem to live in parallel worlds – and when I say we, I am referring to non-profits in the CEE region. There still is a gap between the charitable world and the world of the wealthy. And we need to discover ways how to span this gap. And the only way to do that that I know of is to meet and to have good conversations about important things, about values, about the future, about society, about what constitutes good life which we are all trying to lead, though we each contribute in our own way.
Can you share with us some examples of charities with good practices regarding the endowment?
Endowment is the mark of maturity. This is true for civil society organizations, particularly for foundations, but also for private universities, museums, hospitals or other institutions. There are plenty of examples of endowed organizations that would not be here if it were not for the permanent private investment that someone made – long ago, or just recently.
When we look for good examples around our region, most organizations are – comparatively speaking – at the very start. Nonetheless, the phenomenon is here and it is slowly taking roots. For instance, the Via Foundation in the Czech Republic is running their second 1 million EUR endowment campaign right now. They have just started asking for money, but they had done their homework and I have no doubt they will be successful. And their success will mean a EUR 4 million endowment. This will place them among the top 5 private foundations in the country. What I am trying to say is that in the CEE context they are doing an outstanding job, yet compared to the top five US community foundations with over 1 billion USD in their endowment, their annual grant making is comparable to a one week’s grant of their US counterparts.
So, comparing numbers is of little use in this respect. If you look into the part of every CF in the world, there are 20 or so years in the beginning of building trust, relationships and reputation, before the first transformative gift came, inviting the second and the third, generating enough resources to hire staff and to build a professional local grant-maker, convenor, innovator, initiator and development expert, i.e. a community foundation. And the good news is that there are organizations in the region who are on the right track to do just that.
When working with major donors, what are a few things fundraisers should be aware of?
Major donor fundraising is different from annual fundraising. It is not about marketing, about offering a specific product on the market. It is about relationships and engagement, about your capacity to share visions and dreams … and – of course – about your passion and commitment to pursue it and to deliver the promised impact. Success in major donor fundraising first and foremost reflects your confidence to sit across the table from very wealthy person and have a meaningful conversation with them as an equal.
Most fundraisers’ handbooks say that fundraising is not about money. While this may be true, donors often do not feel that way when ask for support in a fundraising campaign. In major donor fundraising, this is true 200 % at all times: relationships come first, money may follow. But if you ever treat your major donor as if she or he were a wallet, you will have lost them forever. And it is only right, for you do not deserve their support.
What changes should we expect to see in the philanthropy field next year?
We have pretty good data from the previous crises. This pandemic may be different, of course, but I do not expect that. Corporate support usually drops more or less adequately to the extent of the economic downturn – my private estimate is 15 % next year. Private individual support stagnates, but does not decrease significantly – or not at all. In developed philanthropic markets, institutional support from private foundations goes up to make up for the decreased funding from other resources. That is precisely the role that endowed foundation play in times of scarcity, even though the value of their endowments decreases temporarily. That is what I expect. Now, of course, in the CEE region, we do not have mature endowed foundations, so the expected decrease of funding will impact charities, for there is no source of funding to supplement the decline – and I am afraid we cannot expect much solidarity from our national governments.
Credit photo: Jan Kroupa, RFCF