Philanthropy is central to the capital structure of nonprofit groups that attempt to influence public policy, providing much of the money that supports think tanks, litigation firms, activist groups, and nonprofit journalism. The public conversation about philanthropy in politics tends to focus on how the hundreds of millions of dollars that philanthropists invest impact issues of equality of voice. Do the billions directed by the wealthy mean that their voices drown out those of the rest of the citizenry? Is the hyperinequality that has exploded in the sphere of the economy threatening to seep into the polity as well? These are important questions, but they are not the only questions we might ask about foundations in politics.
Equally important to this discussion is the fact that philanthropists bring more than their money and their substantive policy preferences to the world of politics. They also bring their organizational practices, which are shaped by their experiences and the arrangements they create to do their work. These practices, in turn, filter down to the organizations they fund, shaping the strategies and resources that are deployed in political practice. Grantee and grantor are playing a two-level game, the outcome of which determines which organizations are funded, which of the many activities they might engage in that they actually prioritize, and with what level of effectiveness they are able to act on their strategies.
As James Q. Wilson (Reference Wilson2005) astutely observed, the behavior of political organizations cannot be deduced solely from their stated goals or mission or from an assumption about their interests. Interest groups and social movements are driven by “organizational maintenance,” the need to acquire resources and manage internal group conflict. Scholars of “resource mobilization” in sociology have made similar arguments. Footnote 1 If this were the case, we would anticipate that organizations would be shaped in important ways by the varying sources from which they obtain the resources needed for survival. Raising money from members should raise different organizational-maintenance challenges than acquiring resources from “third-party” sources. In fact, given that since the 1960s we have seen a decline in membership-controlled organizations, we should expect that the influence of philanthropic donors over the character of interest groups has increased. This shift in the capital structure of organizations raises a number of important questions. When third parties (i.e., nonmembers) invest resources in groups, what are their motivations and constraints? How are these third-party philanthropists organized to do their work, how do they obtain legitimacy, and how do these factors influence their interactions with grantees?
The funding sources of organizational maintenance do more than influence the “ecology” of groups (i.e., which ones exist and in what areas of activity) they shape how effective they are at their core organizational tasks. This was hinted at by Wilson—that groups with particularly challenging organizational-maintenance imperatives could be hobbled in performing their core tasks, whereas those with especially creative and sensitive funders might actually be enhanced in their ability to perform them. If this is true, it suggests that the comparative functioning of groups in a competitive environment could be shaped by the character of their funding base.
This argument has significant implications for the competition of political parties in a polarized system. If one side of that partisan conflict has funding sources that create fewer conflicts between the organizational-maintenance and substantive goals of those organizations, then, over time, it will have a substantial competitive advantage. The character of funding sources, not only their volume, therefore, should shape the comparative balance of power in politics. At least until recently, conservative organizations had a significant advantage over their liberal rivals where funding consistent with efficient organizational operation is concerned—an advantage that can be reasonably assumed to explain conservatism’s advantages in influencing the policy and intellectual agenda in American politics.
ORGANIZATIONAL MAINTENANCE
It is commonsensical to begin from the assumption that the behavior of organized groups is a function of their underlying objective interests or ideals. It follows from that assumption that the relative power of groups in politics is a function of their relative “social power”—that is, power outside of politics. Wilson began from a different place, with the mundane, prosaic facts of organizational life—the resources that groups need to attract to make payroll, pay the rent, and buy the copier and the coffee machine. Interest groups may come into being for various reasons, but if they cannot find these resources somewhere, they will wither and die. “Whatever else organizations seek, they seek to survive. To survive, they must convince their members that membership is worthwhile” (Wilson Reference Wilson2005, 10). The pursuit, much less the success, of a goal beyond survival is thus an open question—it is entirely possible that organizations can be drawn into an organizational-maintenance trap in which they find ways to satisfy “the wants of its members” without actively or intelligently pursuing any outcome in the world beyond the group. Footnote 2
This organizational-maintenance trap is a persistent possibility because organizational leaders and those on whom they rely for resources are in a condition of asymmetric information. The source of most of the information that suppliers of resources possess comes from grantees themselves. This is starkest in the case of small, direct-mail donors reading a frightening letter warning that polar bears are dying en masse and the only thing standing between them and extinction is the Polar Bear Defense Fund (PBDF). Whereas the claim of the bears’ vulnerable state may be difficult for potential donors to evaluate, it is even more challenging for them to assess the efficacy of PBDF in doing anything about it. Given the scale of resources that they are investing, it is unlikely to be worth it. Even though institutional donors may have more resources to devote to grant making, organizations still have the capacity to invest considerable resources in shaping a perception of organizational effectiveness among the large-donor community that is at odds with their actual impact. Agency costs, therefore, are central to analyzing the funder–grantee relationship.
In Wilson’s analysis, there is a sharp distinction between organizational executives and the constituency they claim to represent. The behavior of leaders cannot be extrapolated from members. Those who actually run organizations, no matter how deep their relationship to the group, have an interest that ordinary members lack—or, at the very least, are highly sensitive to the material constraints of organization survival. The core function of organizational executives “involves supplying tangible and intangible incentives to individuals in order that they will become, or remain, members and will perform certain tasks” (Wilson Reference Wilson2005, 13). Much of the original interest in Wilson’s Political Organizations came from his analysis of the tools that organizational executives had at their disposal—tools much richer than analysts such as Mancur Olson (Reference Olson1965) had imagined. Wilson’s organizational executives were crafty, creative actors, deploying a wide range of devices to transform interests into organization by converting potential members into active members.
The payoff of Wilson’s analysis was it explained the existence of a much wider range of political organizations than a theory of pure material incentives. A collective benefit from organization still was not, as with Olson, sufficient to explain the existence of an organization. However, the factors that Olson (Reference Olson1965) emphasized—including concentration or diffuseness of interests, capacity for monitoring noncontribution, and proximity to others similarly affected—were not ultimately determinative. The profoundly indeterminate aspect of Wilson’s analysis opened up space for agency. Even a relatively concentrated interest might not form or be effective in the absence of a relatively skilled executive capable of deploying the various incentives for membership, whereas a relatively diffuse interest might be pulled together by an executive of particular creativity and imagination.
Even a relatively concentrated interest might not form or be effective in the absence of a relatively skilled executive capable of deploying the various incentives for membership, whereas a relatively diffuse interest might be pulled together by an executive of particular creativity and imagination.
The existence of interests, therefore, does not ensure the existence of organization. The way that an organization comes into being and sustains itself intervenes profoundly between the existence of a pre-political interest and the expression of that interest in politics. Political Organizations was a profoundly constructivist book in that, for Wilson, interests are made, not found. However, unlike the constructivists, who tend to overstate the importance of language and ideas in the making of interests, Wilson emphasized the organizational dimension in the construction of interests. Sociologists in the resource-mobilization tradition (e.g., McCarthy and Zald Reference McCarthy, Zald and Turner2001) were influenced by and extended Wilson’s insights to social-movement organizations, whereas work in political science, such as Young’s (Reference Young2010) Developing Interests, has shown how the political strategies of organizations emerge from internal struggle, conflict, and decisions of organizational leaders. However, what few scholars in this tradition did was break open the decision-making “black box” of the providers of resources themselves. Footnote 3
THE ORGANIZATIONAL-MAINTENANCE IMPERATIVE OF FUNDERS AND THE ECOLOGY OF INTEREST GROUPS
Wilson assumed that how organizations manage to motivate their members to actually contribute, and with what consequence, was the central question of organizational maintenance. However, in the paperback edition of Political Organizations, he observed that “a large part of the increase in [interest group] numbers has arisen because of the greater use of sponsors as opposed to members…sponsorship has become institutionalized in the form of foundations, government agencies, pro bono work at law firms, and court settlements. It is now relatively easy to start a political organization that has, for all practical purposes, no members at all” (Wilson Reference Wilson2005, xii). Although he did not cite Walker on this point, Wilson was clearly cognizant of his work, which showed that the great expansion of interest-group activity in the 1960s and 1970s was traceable to an expansion in third-party funding (Walker Reference Walker1991). Increasingly, as both Wilson and Walker realized, the key question in studying interest groups—especially “public” interest groups—was not how they induced member contribution but rather how they interacted with sources of support who were not “members at all.”
The closest that Wilson got to applying his lens to the problem of organizations without members was in his discussion of what he called “nonorganizational representation.” Wilson observed that “some of the strains of organizational representation can obviously be avoided if the presentation of policy positions is done by persons with no organizations to maintain, and thus with no compromises to be negotiated, no competing ambitions to be reconciled, and no incentives to be supplied” (Reference Wilson2005, 321). He had in mind primarily the organizations created by Ralph Nader, which advocated on behalf of diffuse interests without actually mobilizing them (and thus not facing the organizational-maintenance challenges associated with actual members). Although Wilson noted that Nader took on the organizational-maintenance functions for his organizations—including, tantalizingly, “contacting foundations” (Wilson Reference Wilson2005, 323)—he seemed to think that organizations without members, and thus without ordinary organizational-maintenance challenges, were an unusual quirk associated with charismatic personalities. As Walker (Reference Walker1991) showed, however, organizations without members but with large-foundation (or governmental) patrons were becoming normalized and, in some areas of the public-interest sphere, dominant—even in the absence of charismatic leaders. The rise of patronage rather than membership did not eliminate organizational-maintenance concerns, but it did transform them. Instead of members, many of the new organizations of this era were forced to become highly attuned to the needs, preferences, and idiosyncrasies of major institutional donors.
Although third-party funding grew prodigiously in this era, foundations did not fund everything. Funders make choices, which are often highly decisive. They favor some approaches and set aside others. When those choices—both positive and negative—are aggregated, they can have systemic, regime-level consequences, determining which political approaches gain favor and which do not. They determine which interests are represented in the political system, the timeliness of that representation (i.e., whether quickly in response to opportunity or with substantial and consequential lags), and by whom. Foundations, in short, help determine the composition of democracy’s “heavenly chorus” of interest groups. This was true in the era of the advocacy explosion and it continues to be true today.
Organizational-maintenance questions matter for funders, not only grantees. Funder decisions cannot be simply read off of their formal mission statements or the intention of their founders because they face organizational-maintenance concerns of their own, albeit different than those of interest groups. Foundations are unique in being “resource independent” Footnote 4 —that is, their resources are derived internally from their endowment (except for foundations such as The Pew Charitable Trusts, which are registered as “public charities” and seek resources to supplement their endowment). Resource independence shifts the organizational-maintenance imperative away from resource acquisition to the generation and preservation of legitimacy (Frumkin Reference Frumkin2006). Foundations exercise profound power in American society but without the support that other institutions have from members (i.e., unions), consumers (i.e., companies), and voters (i.e., government). Their very resource independence raises the question of to whom they answer.
Many defenders of foundations argue that they need not answer to anyone, that in a free society the choices of the wealthy about how to direct their largesse are self-justifying (Brody and Tyler Reference Brody and Tyler2009). Over time, however, Congress has disagreed. In the 1960s, Congress launched a series of high-profile investigations of foundations justified by their tax-exempt status. Faced with this external attack on their autonomy, foundations fought back by establishing stricter, fieldwide norms and procedures for grant making in the 1970s and embracing measurable results beginning in the 1990s. In search of legitimacy, foundations were influenced as much by the network of organizations, codes, and consultants in the field and by the practices of leading foundations as they were by their own internally derived standards. Footnote 5 To understand how foundations behave in relationship to the groups they fund, therefore, we must recognize that their behavior is shaped by the field in which their choices are embedded.
The agency problems in foundations, if anything, are exacerbated by professionalism as foundation staff come to identify more with the norms of the field and less with their principals. Footnote 6
Foundations, especially those such as Ford, Rockefeller, and Gates, are large, internally differentiated organizations. They are divided among a nonprofessional board (and sometimes a living donor), a president (who often comes from outside of the field of philanthropy), and a professional staff. Foundations often work on multiple issues (typically, at the direction of the donor) but with typically obscure or vague goals that somehow must be boiled down into specific funding decisions. Due to the often highly technical and long-term quality of foundation grant making and the fact that foundations generate social impact only through their grantees, surveillance of the staff that actually does the work is difficult for nonexpert trustees and even presidents. The agency problems in foundations, if anything, are exacerbated by professionalism as foundation staff come to identify more with the norms of the field and less with their principals. Footnote 6 These agency costs mean that foundation outputs do not reflect a coherent logic derived unproblematically from the mission of their founder or trustees. There is an internal organizational politics, therefore, within the foundation itself.
The behavior of interest groups, therefore, is a type of two-level game. Footnote 7 Interest groups with resource-derived organizational-maintenance imperatives interact with donors who have legitimacy-based organizational-maintenance concerns. Which organizations exist and what they do is a product of the interactions of these two sets of organizational-maintenance imperatives. The legitimacy imperative will influence the types of groups in which foundations choose to invest. For example, they may be more hesitant to invest in groups that are explicitly partisan in orientation or engaged in political mobilization and organization, and more open to investing in organizations that perform seemingly objective research or litigation. Alternatively, the norms within the foundation field that support “measurable outcomes” may cause them to support organizations working closer to the final legislative result they seek and eschew those whose work is farther upstream. These incentives, either directly or indirectly, will filter down to the universe of interest groups that foundations fund.
The consequence of these rational expectations of funder preferences is that organizational-maintenance concerns will cause potential group entrepreneurs to shape their strategies to foundations’ own legitimacy constraints. In anticipation of a failure to receive funding, those with alternative strategies may choose not to form groups at all. Alternatively, the fact that organizations necessarily know more about their actual activities than their funders (i.e., the version of the asymmetric-information problem that is inherent in the funder–grantee relationship) may cause organizations to strategically shape their self-presentation to the funder—even in ways that are not entirely reflective of their actual behavior. To the degree that funders come to recognize the existence of this category of agency costs, they may engage in more monitoring and surveillance. This can take the form of either more evidence of inputs (which translates into paperwork requirements that organizations must minutely describe their activities) or outputs (as in more recent requirements for metrics and measurements of organizational results).
If we assume, as Wilson did, that organizational-maintenance concerns are the primary concerns motivating group leaders, then in a world of third-party funding, we should expect that the preferences of foundations—refracted through their legitimacy concerns and their own internal bureaucratic structure—would filter down into group behavior. The groups that actually form under these conditions may have only a dim relationship to the preferences of members that they claim to represent because those members have few, if any, resources to provide organizational executives, whereas foundations have such resources in abundance. As Skerry (Reference Skerry1995) argued in his discussion of Mexican American organizations, and as Fernandez (Reference Fernandez2015) showed in more recent work on the Mexican American Legal Defense and Educational Fund, a world of third-party funding has pervasive issues of representativeness; in overcoming the collective-action problem, these organizations also face few constraints from their own purported members.
ORGANIZATIONAL MAINTENANCE AND THE INTERNAL OPERATION OF GROUPS
The strategies and organizations that emerge from foundation–grantee interactions are not necessarily efficient in terms of advancing any larger social goals. Where the pursuit of legitimacy—rather than actual effectiveness—places severe constraints on foundation decision making, those constraints will filter down to the groups being funded. When one aggregates up from the level of the individual group and its funders to those of an entire ideological network, there is potential for a theory of durable political competitive advantage rooted in the relative distortions generated by organizational maintenance.
Foundations impact the behavior of their grantees in a number of different ways. First, they determine the degree to which organizational executives control the capital available to their subordinates. To the degree that organizations obtain general operating support for their activities from their funders, the choice of how to allocate capital inside the organization is in the hands of the executive. Therefore, the organizational executive will be focused inward, on the task of management. If third-party funders provide resources only for particular projects devised by the leaders of particular subunits within the organization, the executive will not be able to allocate capital within the organization and will lack the basic tools of management. Consequently, management will not be a priority because the executive lacks the resources to induce compliance from subordinates. All things being equal, we should expect that organizations funded through general operating support will be better managed because executives have the actual scope of control to permit management and because they will be able to invest resources in organizational “public goods” that fall between the cracks of individual programs. Footnote 8
If providing program funding rather than general operating support has such predictably negative impacts on organizational functioning, why do foundations provide it? Again, their own organizational-maintenance imperatives are the explanation. In the 1970s, foundations were in significant disrepute but their grantees were popular. Providing project support established a clear “traceability chain” between foundation support and social outcomes for which the foundation could claim credit, with hoped-for consequences for their popularity. Foundations also considerably “staffed-up” in the 1970s, and foundation labor expanded to fill the available space. With the time to meddle more intensely in their grantees’ work, foundation staff took the opportunity. Finally, before the 1970s, foundations often supported organizations that were well known to their trustees; now, under pressure to fund a broader scope of organizations, they responded by requiring lengthy grant proposals specifying the exact work to be done. The consequence is that foundations and their grantees settled into a stable norm of project support despite the negative effects on organizational effectiveness.
The organizational-maintenance imperatives of foundations also shape the time horizons of their grantees (Teles Reference Teles2008, 271–2). All interest groups work with an operational understanding of how long their projects have to show results and what an acceptable “hit rate” is. In baseball terms, some organizations try to get several walks and singles, whereas others swing for the fences—even if it means numerous strikeouts. In politics, of course, the metaphor is quite rough because the really “big hits” count for much more than the small hits. Going for the big hits means engaging in long-term, often diffuse projects with a low probability of success. Where an organization positions itself in terms of time horizons is partially a function of its own preferences or strategy, but the organizational-maintenance lens points to the importance of resource-holders in this determination.
In a world of general operating support, foundations would hand over resources to organizational executives to make these temporal strategic determinations. However, foundations primarily fund individual projects; therefore, the overall time horizon of interest groups will be determined by the average time horizon of the projects that their funders are willing to support. If interest groups “bid” both long- and short-term projects to their funders and the funders approve only the short-term projects, then organizational maintenance—not the preferences of organizational executives—will determine that the organization will become oriented to the short term.
What does the legitimacy imperative indicate about how foundations will set their time horizons? Given that most foundations are perpetual trusts, we might think that they would have extremely long time horizons. However, the pursuit of legitimacy points in the opposite direction. First, most foundations that operate in the policy sphere tend not to have internalized the concept that the price of a few major transformative successes is a number of investments along the way that do not pay off. Second, foundations are irrationally (from an investment perspective) concerned about the negative media (and possibly governmental) attention they will get for “wasting foundation resources.” Third, the increasing mania in the foundation world for legitimating their role by pointing to “measurable results”—which is supported, in many cases, by trustees with backgrounds in fields in which such metrics make sense (along with the army of consultants selling these metrics)—makes it difficult to justify investing in projects with very long term payoffs or in which attribution of responsibility is difficult. Consequently, the legitimacy imperative of foundations leads to shorter time horizons.
Part of what determines who would win in politics, then, can be traced to the organizational-maintenance imperatives of their funders, which themselves were traceable to different legitimacy imperatives.
FOUNDATIONS AND PARTISAN COMPETITION
For simplicity, I have treated the impacts of foundation preferences on organizational strategy as a constant. However, in reality, they are a variable. Foundations differ considerably in their preference for project versus general operating support and long versus short time horizons. For the sake of argument, assume that all things being equal, project funding and short-time horizons will generally lead to lower returns on organizational investments in politics. A group that receives funding from foundations with these preferences—even if it would like to do otherwise—will be forced to be less efficient than it otherwise might be.
Now imagine a world in which there is not only one organization and one foundation but rather thousands. We further assume that those organizations and foundations are divided into two teams or networks—which we call parties—that are in competition with one another. Finally, we assume that Team A has a set of foundation patrons who provide general operating support with long time horizons, whereas Team B has patrons who provide project funding with short time horizons. Over time, Team A will generate higher returns—in the sense of consequential political wins—on their investments in politics than Team B. In fact, if the relative advantage provided by Team A’s source of funding is sufficiently large, it could compensate for a substantial deficit in resources because the returns will be so much higher. In other words, one team would have a durable competitive advantage in politics. Part of what determines who would win in politics, then, can be traced to the organizational-maintenance imperatives of their funders, which themselves were traceable to different legitimacy imperatives. Ultimately, this “Wilsonian” approach to understanding how organizational maintenance operates in a world of third-party funding would be a theory of power and, ultimately, an explanation of the trajectory of political development.
I described the consequences of the type of competition in the extra-electoral sphere elsewhere (Teles Reference Teles2008, 265-74). However, there is sufficient space here to establish the plausibility of the previously developed theory to note that its predictions more or less align with what consequential actors in politics have observed. It is a commonplace that conservative funders provide primarily general operating support to their grantees. This has allowed them to invest for longer-term gains and to allocate more resources inside their own organizations than similar liberal organizations. Footnote 9 This was the assumption behind the creation of the Democracy Alliance, which was designed to obtain for liberal groups the general operating support of the type that conservatives can do (with admittedly mixed results) (Edsall Reference Edsall2005).
The larger implication of my argument is that foundations are deeply embedded in fundamental parts of the political system studied by political scientists, from interest groups and political parties to courts and public schools. In particular, foundations influence the population of groups, their agenda, and the quality of their operation. The decisions through which that influence emerges are still largely terra incognita to political scientists, but they need not be. In the archives or in the minds of program officers past and present is a rich trove of materials for political scientists in a variety of subfields to exploit. It is high time we did so.
