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Denver: Transformation of any institution is difficult, particularly one as venerable and respected as The Kresge Foundation. Therefore, it’s hard to imagine a more dramatic shift in strategy and direction than has occurred since my first guest assumed the helm there some 10 years ago. He is Rip Rapson, the President and CEO of the Kresge Foundation. Good evening, Rip, and welcome to The Business of Giving!
Rip: Thank you, Denver, it’s a pleasure.
Denver: I’m sure some of our older listeners remember quite well the S.S. Kresge Department Stores — I know that I do. So before we get into the work of the foundation, tell us about Kresge stores and how this whole thing got started.
Rip: S.S. Kresge had a simple idea way back at the turn of the century, and that was to provide what we would now call a “drug store format” to move goods and to get people to a luncheon counter. Over the next 20 or 25 years, he slowly chipped away at this. It started in the Midwest, where it began to spread throughout the country. By 1924, the Kresge “five-and-dime” had become synonymous with small town retail, small town social activity. And it was where everyone went to get their Cherry Coke.
Over the next 50 years, it grew and it grew and ultimately transformed itself into Kmart. It’s hard to remember, but in the early ‘60s, Kmart was really giving Walmart a run for its money. Sam Walton often said that they felt that they were just within a couple of business cycles of being essentially put out of business by Kmart. Little hard to imagine today, but true. It got big enough… and it got successful enough… that the family and Sebastian’s son basically made the decision that they would get out of the business. They would sell their interest in Kmart, grab the money, put it in a trust, and create a foundation. So that’s how the Kresge Foundation was born in the late ‘60s, early ‘70s.
Denver: Great background! Well, moving to the Foundation, if I look at some of my professional scar tissue, much of it was earned early in my nonprofit professional career doing Kresge challenge grants. And if I may dare say, it was truly a painful process. And this is pretty much the organization that you walked into when you took the reins of Kresge back in 2006. Tell us about that process, challenge grants, and how they worked.
Rip: Well, 20 or 25 years ago, the Kresge leadership team came up with the idea that not only should they support “building campaigns” — which they had been doing for the better part of a half-century… it’s really some of the first giving that Sebastian had done in the ‘20s, ‘30s and the ‘40s, but it was really sort of checkbook philanthropy. But in the early ‘60s and ‘70s, it struck them that if they could actually use their money through greater leverage… if they could say to a building campaign, “We will give you a chunk of money, so that by the time you get your lead gifts in, by the time you get all your corporate gifts in– and you really have to turn to your individual donors, we’re going to give you an incentive package essentially to get those donors online in the hopes that over the long term, that will really increase your stability and your sustainability.”
So the Kresge Challenge Grant was born probably 25 or 30 years ago. At that time, it was seen as this audacious, almost intrusive way of getting institutions to raise money. And again, it’s hard to remember that, because now, 20 or 30 years later, this is absolutely standard practice in the fundraising business of nonprofits. But for the better part of 30 years, Kresge would come in the middle of a campaign, put money on the table and say, “If you match this, we’ll free the money, and you can get across the finish line faster and with a broader donor base.”
Denver: It will be the “capstone” to this capital campaign effort. So, you arrived at Kresge in 2006 and you bring with you, Rip, a really interesting background and a breadth of experience. You worked in the public sector as a legislative aide to Congressman Fraser; were the deputy mayor in Minneapolis. You have private sector experience working as a lawyer and doing a lot of pro bono work and, of course, nonprofit experience having led the McKnight Foundation. So given this background, give us a sense of how you imagined some different possibilities for Kresge… and then how you went about introducing them.
Rip: It’s such an interesting question. If I can peel it away just a little bit, Denver. Because when I was first approached to talk to the Kresge Foundation–when they were looking for a new executive in 2005-2006– I said to the search firm that I wasn’t particularly interested. Kresge was such a familiar brand, and as you suggested: challenge grants were all they did — they were the bricks-and-mortar folks — and in many ways, they had refined how to do this within an inch of its life. It was really almost an algorithm. You would construct a gift chart with a certain number at the top, and a certain number in the middle, and a certain number at the base, and you would sort of push the numbers through that frame. And if it came out the other side in a way that seemed to meet the standard, then we became an ATM machine, and the money flowed.
Denver: And it was the same for every institution, no matter what the sector.
Rip: Every institution. So if you were the Harvard Medical School… or a hospice in San Diego… or an arts organization in San Diego, it didn’t make any difference.
And there was something valuable in that it really helped refine and streamline a lot of fundraising operations in a lot of places.