Five ways to make your federation better

Federations are one of the great success stories in American philanthropy. They attract thousands of volunteers and contributors, raise hundreds of millions of dollars, manage billions of dollars in a wide array of endowments and philanthropic funds, and mount special campaigns and emergency operations that raise hundreds of millions more. If the federation system vanished tomorrow, it would immediately, out of necessity, be reinvented.

Still, there is room for progress. In real dollars, adjusting for inflation, the annual campaign has been in steady decline for decades. The number of donors has also decreased. On the other hand, Jewish philanthropy outside the umbrella campaign has grown by leaps and bounds. Private foundations have mushroomed in number, size, and the amounts of money they give away. Myriad organizations successfully raise money for Jewish causes.

Federations should consider five changes to prosper. First, federations should be in the philanthropy business, which is more expansive than collecting and distributing funds. Most federations are mired in the belief that they are in the fundraising business (even if they say otherwise). Federations should be working with private foundations, creating better mechanisms to evaluate and monitor grants and allocations, guiding contributions, and endowments to Jewish causes.

Second, federations should abandon the idea that they are the “central address” of the Jewish community. Some federations still use the term — some don’t. Regardless, they often think of themselves this way. They shouldn’t. The phrase and the ideology behind it are associated with control and authority. Perhaps it’s not meant to, but it is easy to see why other institutions in Jewish life and the leaders who represent them view it as a kind of institutional arrogance. Central address carries with it an image of big brother and overblown bureaucracies.

Rather than “central address,” federations should think of themselves as Grand Central Station, a complex where ideas, resources, and initiatives intersect. They should play a vital leadership role that derives authority from the coordination, leadership and vision that they provide, not from the control of dollars they collect and hand out. The constituent and beneficiary agency system is antiquated.

Third, too much time, attention, money, and staff are spent on the annual campaign. It is a mistake to emphasize the annual campaign over endowment growth, special efforts, capital campaigns, and building relationships with foundations. This misallocation of resources creates a host of missed philanthropic opportunities.

This is not to suggest that the annual campaign is not an important part of the federation’s overall system and a vital component of Jewish philanthropy. De-emphasizing does not mean abandoning, but rather utilizing more resources on building the other components of federation philanthropy.

This suggests a fourth change that federations need to make: investing more in staff and infrastructure. Too often, federations cut back or keep their staff purposely lean — largely driven by leaders who want lower administrative cost. This formula is a faulty one. Efficiency makes sense; cutting costs to the point where federations cannot gain a larger share of the philanthropy market does not. Dollars spent on development, management, and evaluation will bring more funds into Jewish philanthropy. They are part of the cost of doing business. Federations are in a business that needs investment capital — now.

Fifth, federations need new methods of decision-making to shift from the fundraising business to the philanthropy business. The need to build consensus often results in paralysis and indecision. Federations don’t need consensus; they need action. They can react fast and focused in times of crisis, such as the recent war between Israel and a number of terrorist organizations out to destroy it. Federations need that agility and passion on a daily basis. These institutions need to empower leadership to act, to make decisions that not everybody agrees with all the time.

This could be and should be a boom time for Jewish philanthropy, with federations playing a key role. Vast resources of accumulated wealth have already been deposited in tens of thousands of foundations, both inside and outside the federation structure. Individuals have largely untapped income and assets. Federations need to be the center and the public forum for the golden age of Jewish philanthropy.