Darren Walker on the Business of Giving

Darren Walker, The President of the Ford Foundation, talks about the history of the Foundation, it’s new focus on inequality and increased unrestricted support, and the importance of the Board and corporate culture in creating successful change within an institution. This conversation took place with Denver Frederick, the Host of The Business of Giving, and aired on AM 970 The Answer in New York on November 15, 2015.

Denver Frederick: In the world of philanthropy there has been a tremendous amount of buzz that has surrounded my next guest, the 13th President and CEO of the Ford Foundation, Darren Walker. Darren, thanks so much for joining me on the Business of Giving.

Darren Walker: Happy to be here, Denver.

Frederick: Why don’t you start by giving us a brief overview of the Ford Foundation, its history, its guiding principles, and some of your milestone achievements.

Walker: The Ford Foundation was founded in 1936 by Edsel and Henry Ford in Detroit, Michigan, with the objective of serving the local Detroit community. In 1950, Edsel’s son, Henry Ford II, became the chair of the Board of the Ford Foundation and embarked upon a transformational reimagining of the Ford Foundation. This was made possible by the Ford Foundation’s ownership of stock in the Ford Motor Company. We were the largest shareholder in the Ford Motor Company, and when the Ford Motor Company went public overnight, the Ford Foundation became twice the size of the Rockefeller Foundation and Carnegie Corporation combined. Henry decided that our mission would expand and that we would become an international foundation, and that our foundation would move its headquarters from Detroit to NYC.

“That remains our core mission to this day. The idea that we seek a world that is more just, fair and peaceful with opportunity for all.”

At that time, a new ambitious and global agenda was set that focused on expanding democracy, reducing poverty and advancing human achievement in the world. That remains our core mission to this day. The idea that we seek a world that is more just, fair and peaceful with opportunity for all.

Frederick: You’ve had some dramatic signature achievements over the years, tell us about a couple of the programs that the Ford Foundation has gotten behind and made possible.

“I think of our work over the many years as the three i’s: investing in institutions, ideas and individual leaders.”

Walker: Denver, I think of our work over the many years as the three i’s: investing in institutions, ideas and individual leaders. When we look at the narrative arc of the Ford Foundation’s history, our influence in the United States and across the world has been pretty profound through the three i’s.
Institutions that the Ford Foundation has helped to create include: the Public Broadcasting System, Human Rights Watch, and in South Africa, the largest public interest law firm,  and Sesame Street. These are but a few.
In terms of individual leaders we’ve supported a broad range of people in the arts, in business, in the humanities and science, and of course the social justice arena, most notably Dr. Martin Luther King.

In fact, when Dr. King was assassinated he was on a Ford Foundation Grant. We’ve also supported Gloria Steinem with her first grant to start the woman’s movement. People like James Baldwin, and other artists: the Dance Theater of Harlem, School of American Ballet…these are significant institutions and individuals we’ve supported.
Finally ideas, supporting innovative ideas. Many of these have had transformational impacts in our society. They include ideas like legal services for the poor, microfinance, the community development movement across the United States and most recently our new work on the internet.

Frederick: That is an impressive history indeed. With that, earlier this year, the Ford Foundation announced a rather dramatic change in its approach and strategy toward grant-making. If Andrew Carnegie’s 1889 “Gospel of Wealth” has informed philanthropy for 125 years, the Ford Foundation has proposed, dare I say, a new “Gospel of Wealth”. Tell us about it Darren, and your new focus.

Walker: I think Andrew Carnegie was a remarkable, extraordinary visionary. We continue to this day benefit from his great vision. But, we live in a different time. We certainly have more knowledge, more technology. There has been more innovation and advances in terms of social progress. Because of that, I don’t think the 1889 essay and the idea behind that is sufficient to grapple with what today is the scourge of inequality.

“…while philanthropy is commendable, it should not allow the philanthropist to forget the economic injustice that requires philanthropy in the first place.”

Inequality is in many ways the greatest threat to our idea of a more just and fair world. I would like to reflect on the words of Dr. Martin Luther King, who in 1968 reminded philanthropists that while philanthropy is commendable, it should not allow the philanthropist to forget the economic injustice that requires philanthropy in the first place.

Frederick: That’s an interesting concept. I think with inequality, we are at a point where we take it as a default position, as a given we don’t question. But, you are really looking at the system and saying “how does this happen?” Is there anything we can do at the roots to change the equation?

Walker: Inequality is created by a number of factors. We don’t have to have the levels of inequality that we have in our society. There are a set of drivers that deliver the consequences of inequality. These drivers include things like: 1) A lack of access to education. 2) The rules of the game of the economy being stacked against people who already aren’t privileged in that economy. 3) The lack of investment in public goods.
4) Narratives that seem to justify that it is ok to have a society that is unequal. All of these things contribute to our notions and understanding of inequality. It doesn’t have to be this way, we can make progress in reducing inequality.

Frederick: There is really an inequality of having a voice in this society and being heard and being counted. The way you have looked at this is not just economic inequality, it is a far more broad and pervasive sense of inequality that the Ford Foundation is trying to attack.

Walker: Indeed, in the public discourse, income inequality is often discussed. Inequality has many forms including cultural, gender-based, racial and ethnic and caste-based inequality. We want to look at this holistically, because in fact, in order to address it successfully, we have to take a holistic approach. I would say that, if we want to reduce inequality, we have to invest more in education.

“Many surveys indicate that people believe our systems, our system of finance, of government, the political economy are stacked against them. That’s a big problem.”

We have to have decent and strong public institutions, we have to ensure that people do have access to their government. One of the really disturbing trends is the lack of trust and cynicism that exists in American society today. In fact, recently, a poll suggested that over half the American population believes that inequality is a major threat. In addition, many surveys indicate that people believe our systems, our system of finance, of government, the political economy are stacked against them. That’s a big problem.

Frederick: That’s scary.

Walker: That’s very scary, Denver. At the heart of the American narrative is the idea of opportunity. What inequality does is it squashes, it asphyxiates the idea of opportunity in our society. I am the great beneficiary of a society that believed in me. I was a poor kid in a small Texas town, and a woman approached the porch of our little shotgun house in 1965 and asked my mother if she could enroll me in “Head Start.”

Frederick: That’s when it started right?

Walker: I was lucky enough to be in the inaugural class of Head Start. That program was a signal to me and my family, that while my plight might have been poor, my status might have been poor…my ambitious could be boundless, and inspiration could be infinite. That’s what equality and opportunity is about.

Frederick: Are you saying a young black boy, at the age of 5 today, doesn’t have the chance that you had back in 1965? Is that fair to say?

Walker: I think it’s fair to say that today, if you are low income, if you are living on the margins, like my mother was in 1965, it’s much more difficult to believe that the system will produce for you, your dreams. That the system if you work hard and play by the rules, that you will be able to get on that mobility escalator and ride it to the top.

Frederick: Which America has fallen woefully behind other nations over the course of those last 50 years.

Walker: All of the data demonstrates that social mobility is slowing down, and for some Americans the escalator has stopped. It has simply stopped. That is the most profound expense of inequality, that people lose hope. At the core of the American narrative are the pillars of opportunity and hope, and inequality kills both.

Frederick: When you have a system that grabs that hope away from you, you give up. You simply give up. It’s hard to take a step forward, so I hear exactly what you are saying.

“All of us who are privileged in this society need to think about how we take our privilege and make sure more people share in it.”

Walker: It’s so true, and I will tell you I was confronted with something recently. I visited the Bard Prison Initiative up in Ulster County. The Ford Foundation supports an effort there. The brilliant Leon Botstein, the President of Bard, created the program to give degrees and diplomas to incarcerated men and women, a Bard degree in fact. I went into this prison and I was confronted with men who looked like me, mostly black and brown, reading Ulysses and Aristotle and the poems of Langston Hughes and the essays of James Baldwin. I was completely blown away and inspired. They are so hopeful because they have a system that is providing an education for them, and they can see a pathway when they leave.

The problem is we don’t have enough hope in our society anymore. All of us who are privileged in this society need to think about how we take our privilege and make sure more people share in it.

Frederick: Let me get back to your new strategy at the Ford Foundation. Another major piece of it is that you will significantly increase grant money directed towards general operating support, or unrestricted support as opposed to program support. What is the difference between the two of them and why are you increasing the percentage toward the former?

“…the real costs of administering nonprofit organizations are higher than what is reported.”

Walker: Your public probably doesn’t know the difference and most people who aren’t nonprofit wonks won’t either. It’s a big deal, Denver. The problem is most nonprofit organizations don’t have enough resources for their core infrastructure, the unsexy things that donors often don’t know about or really care to fund: the IT system, the support for rent and administrative costs. These are all things that are essential and in a business are invested in by shareholders because they get a return on that.

Unfortunately, in the nonprofit sector, nonprofits are penalized if they actually even share what their real costs are. What we need to do is acknowledge what we all know and that is that the real costs of administering nonprofit organizations are higher than what is reported.

What I want to do is to encourage a conversation as to what these costs are. In order to do that, we donors have to open the door and acknowledge what we all know is true, and that is that it costs more. We need to provide more core operating support, unrestricted dollars that allow management of the nonprofit and the board of the nonprofit to deploy these dollars as they strategically feel is necessary…rather than have the Ford Foundation direct and tell them how to use our dollars. In many ways, it’s a signal of endorsement of management and the boards. We have to be careful because not all are effective and we need to support those that are effective.

Frederick: It’s a big step. I think only 20% of support goes to core support. We, for some reason, reward nonprofits for being
efficient, but we need to reward them for being effective. You are, though, giving up control and trusting more aren’t you?

Walker: Absolutely. We should be giving up our control because in fact, the people who run nonprofit organizations and their boards are in a much better position to direct their resources to the best use. So I am willing, and I think others in philanthropy are willing, when we have other organizations that are doing excellent work, to support and invest in them to do more excellent work. Now, we are going to double our overhead costs, separately from unrestricted giving, and which we have just authorized $1 billion over five years for general support.
For example, if we fund a program on housing, we have to add to that grant the administrative costs for administering that grant to the housing nonprofit we give that money to.

Frederick: Got it.

Walker: We now are going to increase the value of the grant from 10% to 20% of the value of the grant, our overhead donation to the charity. That recognizes that simply putting a 10% cap on overhead is not the best policy. We have to be more generous and more strategic in how we do our grant-making.

Frederick: You know Darren, when this news came out about the change, I think many people gravitated to the inequality part of it. Others, particularly in the nonprofit sector siad, “Oh Ford is giving more unrestricted support!” My reaction was different. It was how in the world did he ever get this done and have it received so enthusiastically and with such acclaim? To steal a line from Bette Davis about aging, these kind of changes in legacy organizations, “They ain’t for sissies”. I know when you try to effectuate something like this, it’s akin to turning the Queen Mary around in a bathtub. How did you do it?

Walker: It all begins with the board. Everything that is right or wrong with an organization, whether a for-profit or a nonprofit can be traced to the doorstep of the board of trustees. In the case of the Ford Foundation, we have a remarkable board. They are committed, they are passionate, and they are invested for the long term.

“…boards determine the success or failure of an organization.”

They understand, because many of them serve on nonprofit boards, that boards determine the success or failure of an organization. We have been on this journey and partnership, me as CEO with them as the board, of transformation of a legacy organization. Building on our history, our rich heritage, the things that we have learned that worked and jettisoning things that have not worked. Taking on new challenges in new ways, organizing ourselves in a more integrative way, in terms of our staffing patterns and making grants. Moving out of silos and disciplines and more hybrid structures and systems, because that’s the way communities are organized. Communities aren’t organized in silos of housing, education, child welfare. They are integrative systems. We have to respond in kind in order to be an effective foundation.

Frederick: I think progress is really made at the intersections of these silos so you can’t have them separate and distinct. Love what you said about the board. So often when a new president comes in, they throw everything out and start all over again, and if the board does not understand that is their responsibility to have a semblance of continuity, we just lurch from one initiative to another initiative.

Walker: And we lose our institutional memory and that institutional wisdom of having that comes with having a narrative arc in understanding the core DNA of the institution. What it is really about is how to reimagine, update and modernize, but not throw it out. Too many leaders believe that in order to make their mark, everything has to be new or the history begins the day they arrive. I feel that the history of the Ford Foundation makes it possible for me to aspire and be ambitious. Without the legacy, without the billions of dollars, and the millions of people impacted by the Ford Foundation’s work I wouldn’t have this platform. I take it seriously and it is a privilege to every day walk into the Ford Foundation headquarters and do the work we do.

Frederick: You began by setting the culture for the organization. Tell me about that and what your vision was as it related to the employee culture….the corporate culture for the Ford Foundation.

“Strategy rests on culture.”

Walker: Leaders often focus on strategy. Strategy is sexy; strategy gets put in a powerpoint and you can click your way through it, and the last slide shows impact. Strategy rests on culture. The success of strategy, the success of a leader’s strategy rests on the culture that leader helps to build and that is often overlooked. I think Peter Drucker had it right when he said, “culture eats strategy for breakfast.” And it does. As a leader, if you don’t focus on the culture inside your organization the staff sense of efficacy and their commitment to the mission, their connection to you as leader, and to the work we do around the world, you won’t have a successful culture.

So, I absolutely spend time on culture, not because in some phony way I want to build culture, but because in a genuine way, I thoroughly enjoy the engagement with people. Whether it’s the people working in the cafeteria, or the guards downstairs or the senior leaders around the world, you have to focus on your front lines. They are the ambassadors. Leaders often forget how significant and how influential those informal networks are.

Frederick: I think employee culture has almost an infallible credibility detector, and they know what you emphasize and what you reward and what you prioritize. And you have been so consistent in sticking to that message. I’m sure, Darren, you were tempted to maybe go in another diretion in times of extreme stress, but no, you have to stick to those principles because they have a profound difference in that employee culture and of them knowing what is going to be rewarded.

Walker: This is the problem with organizations, and sometimes this is the challenge for leaders. It’s easy to say you want a culture that is more participatory and inclusive and consultative. To then do that is really hard. To do it consistently, as well. The minute you stop doing it, your staff will call you out on it. They may not say anything to you, but that word will get out, and I think that’s the problem. That’s when the people start to realize the Emperor has no clothes.

You’ve gotta be consistent and you have to internalize it and have to mean it. Hopefully, the Ford staff know that I’m genuinely committed to their engagement, and I can’t be a good President if I don’t have their engagement.

Frederick: One of the things you did as far as the culture is concerned is that you upgraded the importance of talent and the human resource function. It seemed to me that you weren’t just trying to hire the best people, you were trying to hire the right people. Give us your philosophy on building a team.

“My philosophy is rooted in one idea. Hire people who are smarter and better than me.”

Walker: My philosophy is rooted in one idea. Hire people who are smarter and better than me. I have an amazing team. They are all smarter and better than me. It is quite true, and I celebrate them. The President sometimes need to be the smartest guy or gal in the room and have the last word. That’s not always an effective strategy for success.

Another thing that you have to do is really be open, in a public way, to criticism. I received an e-mail once that challenged a new policy that I had announced. I read her e-mail and she was right. At our next town hall event, with our all-staff once a month that we do, I read her e-mail in which she told me that I was wrong.
It was a courageous move by this assistant, I asked her to stand up and called her out as an example of an exemplary Ford staffer. What she did took courage— to tell the President that he was wrong, but she was right and I wanted to acknowledge that.

Frederick: That takes courage on your part as well, you know.

Walker: For me, I don’t think it was courageous, I think it was just natural. If they thought I was doing something wrong, I’d want to hear about it. It was an opportunity for me to demonstrate whether I’d walk the talk.

Frederick: Bill Drayton, the founder of Ashoka and the father of social entrepreneurship, has said that the one indispensable characteristic for success in the 21st century, and particularly among leaders, is empathy. You do not see empathy and leadership in the same sentence very often. But you are an empathic leader. Tell us about your view of that.

Walker: I agree with Bill on that. And I don’t think empathy can be taught in business school. I learned empathy because my journey has demanded of me that I understand what it feels like to be marginalized and left behind and left out.

Frederick: Give us a little bit more about your journey. It is a fascinating one.

Walker: I was born in a charity hospital in a town in Louisiana to a single mother. My mother moved us to Ames, Texas, population 1,400 in Liberty County, Texas. I was in the first class of Head Start, I attended public schools, I worked as a busboy at age 14.

Frederick: You probably learned more there then any other job you’ve ever had.

Walker: I’m often asked what was the most important work experience that prepared you for the Ford Foundation. The singular most important job I ever had to prepare me was being a bus boy.

Frederick: Why?

Walker: It allowed me to be in a room of privilege and not know privilege. To walk around that room and be invisible, and be marginal, and to have as my task to wait on people who often didn’t acknowledge my presence or say thank you or in any way express gratitude for the fact I was there waiting on them. That’s the way a lot of people feel unfortunately, that they are on the margins and invisible and an afterthought for our politicians and privileged people, like me.

Frederick: I think also, your empathy comes from your breadth of experience. You’ve been on the investment banker side; you’ve been on the lawyer side, you worked in community development in Harlem. I don’t think that people sometimes appreciate the other guy’s point of view. In fact they have completely incorrect narratives about those people. That’s what has made you so effective at building public-private partnerships. You can build these hybrid relationships like really no other leader we have right now.

Walker: I am not too sure about that. I do think that my experience in the private and public sector has benefited me and has benefited the Ford Foundation. I am also not an ideological person. I think ideology sometimes can be dangerous. It constrains and limits our thinking and our ability to look across politics, geography, belief systems. For me, as a leader, what I’m most interested in is getting things done.
In the area of criminal justice reform, we have a partnership of conservative philanthropists, and even the Koch brothers are a part of it. They are as interested, as we are, in ending the mass incarceration of far too many Americans in this country. We want to work with them to get new policies to end this addiction
to incarceration we have in this country. I’m not too concerned about someone’s political ideology, I’m concerned we are on the same page and have the same objective to solve a problem.

Frederick: And getting back to your overall approach at Ford for a minute, and I think I have this right, the strategy is there but you will constantly be updating it. Someone said once that strategy and implementation are now the same thing. In fact, Reed Hoffman of LinkedIn has said that if you are going to introduce a product, and after introducing the prototype of that product people don’t laugh at you, you’ve waited too long. The idea of not having a theological approach but going back, getting feedback and that the iterative process is what this is all about.

Walker: So much of this is research and development theory. We are constantly iterating, adapting, learning and adjusting our policy. For me, strategy is not static, it’s dynamic. Organizations that are going to be effective in the 21st century have to understand that. We are fast out of the gates with our new strategy but we are evolving, it won’t be the same every year.

Frederick: Let me close with this question, Darren. Is there anything of significance that you’ve changed your mind about in the last ten years and, if so, what was it and what made you change your mind?

“… we aren’t going to solve any of the great problems we face without the collaboration and partnership of government, of the private sector, of civil society.”

Walker: I think I’ve come to understand we aren’t going to solve any of the great problems we face without the collaboration and partnership of government, of the private sector, and of civil society. The problems we face today are too big for any one sector to solve. We each have a role to play.

What I, and we, at the Ford Foundation want to do is facilitate the kinds of partnership, the kinds of collaboration that help us solve big problems.

Frederick: I can’t thank you enough for being here, Darren. I thoroughly enjoyed our conversation and I’m sure everyone listening in did as well . I hope you’ll consider coming back in a year or so from now and give us an update on your progress.

Walker: Denver, it has been great fun for me and I would be happy to be back on your show whenever you invite me.

For more information on Darren Walker and The Ford Foundation, go to www.fordfoundation.org.

Tune in to The Business of Giving radio show Sundays at 6PM ET on AM970 The Answer, or listen to the live stream here: http://am970theanswer.com/pages/denver-frederick


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