McKinsey Report Misses Mark on Foundation Leadership

Advice on leadership is everywhere you turn but, unfortunately, a decent amount of it is not so helpful. Enter into this uneven genre a newly released report from McKinsey & Company, the global corporate consulting firm, which seeks to answer the question, “what makes a great philanthropy CEO?”

I will try to put aside the question of why we would look to McKinsey to understand what it takes to run a foundation. It would be like asking CEP to offer up insights on what it takes to lead an oil and gas company (or, say, a duplicitous opioid manufacturer). Let’s also try to put aside their questionable methodology, which essentially amounted to a popularity contest in which McKinsey asked foundation CEOs who among their peers they admired and then interviewed those people. Finally, let’s put aside the fact that, I too, admire greatly many of the foundation leaders they highlight as exemplars.

Let’s turn instead to the findings. So, what is McKinsey’s answer to the question of what makes a great CEO of a grantmaking institution? Three qualities or, as the authors put it, “the trifecta of philanthropy leadership skills” — “discernment, relational intelligence, and storytelling.”

Under the quality of “discernment,” they urge leaders to “trust their judgment,” rely on their own expertise, and “make big moves.” “Discernment involves seeing beyond what can be known or analyzed and draws upon wisdom, intuition, and reflection,” the authors write.

The second quality, “relational intelligence” requires CEOs, according to McKinsey, to “create mighty partnerships” and “overinvest in understanding the boards or principals.” The authors write that, “Strong relationships allow these CEOs to build the level of trust needed to truly lead the organization versus merely stewarding it.”

The final dimension, “storytelling,” involves connecting to the founding story of the foundation as well as to the individual leader’s personal story. “The connection between the CEO’s story and the institution’s story must be emotional and authentic,” the authors write.

That’s it, apparently: discernment, relational intelligence, and storytelling. Those profiled in this piece — many of whom I know and whose leadership I admire deeply — could not possibly have known how platitudinous the end product would be or how off key for the moment we’re in it would feel when published.

To be clear, I am not arguing that the three qualities highlighted aren’t important to leadership (of any organization). Getting good at storytelling, for example, may be a harder task for funders given they’re often a step removed from on-the-ground impact, and are frequently funding across disparate issues, but it’s hardly new advice to any leader, and I don’t disagree with it.

I do have plenty of specific disagreements, though, with how McKinsey thinks these three qualities should play out in practice. In my experience, for example, it’s just as commonly the case that CEOs of large foundations need to be encouraged to question — or seek feedback on — their own judgments before they “make big moves” as to trust them, as McKinsey advises.

I also don’t think it’s the case that foundations need necessarily to be the ones “creating” or “architecting” “mighty partnerships,” as McKinsey suggests. They could maybe instead join in a partnership that someone else — maybe another funder or even (hear me out) one of their grantees — proposes. Indeed, many funders (including a number of those referenced in the report) are working in this way, joining collaboratives and pooled funds created by others.

To that point, and most significantly, any real discussion of the dynamics between funders and nonprofits is pretty much missing from the McKinsey report. This despite the fact that the primary responsibility, legally, of non-operating foundations is to make grants to eligible nonprofit organizations.

It is stunning, if not totally unexpected given where the big financial resources lie, that McKinsey treats nonprofits themselves as an afterthought (they’re barely mentioned). They focus their relationship-building counsel for foundation leaders on those with more power (boards and principals), rather than on how to help foundation staff develop close partnerships with the nonprofits doing the vital work in communities and on issues.

I obviously wasn’t witness to the interviews they conducted, but I am quite confident, just given who they interviewed, that the foundation leaders themselves emphasized the importance of supporting nonprofits to be as effective as possible in pursuit of shared goals as a crucial dimension of philanthropic leadership. After all, it is through these organizations that impact is created.

Yet, somehow, the folks at McKinsey didn’t think this important enough to highlight, even as nonprofits (who, again, are the ones doing the work foundations are supporting) face unprecedented challenges in the form of increased demand and funding cuts. (The words “nonprofit” and “grantee” appear in the report fewer than 10 times, combined; the word “board,” on the other hand shows up 38 times.)

It may be a good business development strategy to highlight prospective clients with large endowments as exemplars in a public report (though I think McKinsey is underestimating the ability of those they profile to see right through this). But this kind of dumbing down of the complex challenge of running a major grantmaking entity — including essentially ignoring grant recipients — isn’t helpful. Especially now.

It is a powerful reminder, however, and please forgive me here if this sounds parochial, of why we should be supporting the ecosystem of organizations, from the Urban Institute to Candid to the Indiana University Lilly School of Philanthropy,  that actually understand the philanthropic and nonprofit sectors to study it — not turning to profit-maximizing corporate consulting firms to do so.

And then McKinsey can get back to advising those whose industries they really understand, like, say, oil and gas companies.

Phil Buchanan is president of the Center for Effective Philanthropy, author of  “Giving Done Right: Effective Philanthropy and Making Every Dollar Count,” and co-host of the Giving Done Right podcast.